Oil crisis could boost struggling sustainable aviation fuel industry – Image for illustrative purposes only (Image credits: Unsplash)
Global oil prices have surged sharply after the closure of the Strait of Hormuz, pushing traditional jet fuel costs close to double their previous levels and forcing airlines in many regions to increase fares or reduce services. The sudden spike has drawn fresh attention to sustainable aviation fuel, or SAF, which is produced from plant-based feedstocks or green hydrogen and has long been viewed as the primary route to lower aviation emissions. Although SAF remains more expensive than conventional kerosene, the gap has narrowed enough to prompt renewed interest from airlines, governments and investors seeking greater stability in fuel supplies.
Immediate Pressure on Airlines and Fuel Markets
Airlines have faced the highest jet fuel prices recorded in the history of commercial aviation, according to the International Air Transport Association. The combination of elevated costs and supply uncertainty has already led carriers to adjust routes and pricing, with some flights cancelled outright in affected markets. Refineries that produce jet fuel have also come under strain, as declining demand for diesel from electrified road transport has reduced overall profitability for many facilities.
Industry analysts note that the current situation builds on longer-term challenges in the refining sector. The latest disruptions have simply accelerated the need for alternatives that are less tied to volatile crude supplies from a single region. This shift in economics has made SAF appear more competitive in the short term, even as production volumes remain limited.
Policy Mandates Create a Floor for Demand
Both the European Union and the United Kingdom introduced blending requirements that took effect in January 2025. Fuel suppliers at airports in these regions must now incorporate at least 2 percent SAF into conventional kerosene, with the share rising steadily to 32 percent in the EU and 22 percent in the UK by 2040. These rules were designed to guarantee a market for SAF regardless of short-term price fluctuations.
Producers have warned that uncertainty over possible future changes to the mandates has already slowed investment decisions. At the same time, airline and fuel executives from outside Europe have argued that the current rules favor local production because SAF must be physically delivered to European airports to count toward compliance. This geographic restriction has limited opportunities for lower-cost producers in regions such as Africa and Southeast Asia.
Calls for Book-and-Claim Systems and Energy Security Benefits
Executives from African carriers and SAF developers have urged the EU and UK to adopt a book-and-claim accounting system. Under such an approach, SAF produced and used elsewhere could still count toward European mandates, allowing cheaper feedstocks such as used cooking oil or Kenyan crops to enter the supply chain without the inefficiency of long-distance physical transport. Kenya Airways sustainability lead Wakina Mutembei has described the change as a potential business opportunity that would create jobs and foreign currency earnings in producing countries while lowering overall costs for European buyers.
Similar arguments have surfaced in military and defense circles. The German company Rheinmetall has partnered with Ineratec to develop e-SAF technology based on hydrogen, while the U.S. Department of Defense previously committed $65 million to an American e-SAF startup. Former SAF consultant Susan van Dyk has observed that the energy crisis may encourage governments to increase support for domestic production as a hedge against reliance on Middle Eastern oil supplies.
Key points on current blending targets
- EU: 2% SAF now, rising to 32% by 2040
- UK: 2% SAF now, rising to 22% by 2040
- Both mandates began in January 2025
The combination of higher fossil fuel prices and existing policy commitments has therefore created a narrower window in which SAF can compete on cost while also addressing long-term energy security concerns. Whether this momentum translates into sustained investment and scaled production will depend on how governments and regulators respond to the calls for more flexible compliance mechanisms in the months ahead.