Could SAF Be a Cost-Effective Solution to Rising Aviation Fuel Prices?

by Thom Patterson (Flying) As fuel prices skyrocket, will sustainable aviation fuel ever be a less-expensive alternative? With the price of conventional aviation fuel skyrocketing in the wake of Russia’s invasion of Ukraine, could sustainable aviation fuel (SAF) offer any relief?

For a while now, governments, major airlines, and several aviation organizations have been encouraging the industry to embrace SAF to help achieve net-zero carbon emissions by 2050. This is because SAF burns more cleanly and is made from renewable resources, such as used cooking oil and grain.

The average worldwide price of jet fuel is about $4.15 per gallon—about 149 percent more than a year ago, according to the International Air Transport Association (IATA). Compare that to the U.S. average price of a gallon of SAF, which is about $8.67, according to GlobalAir, which averages pricing from more than 3,200 FBOs. In fact, IATA estimates SAF in all its iterations generally costs two to four times as much as any aviation fuel.

Typically for airlines, fuel accounts for about 20 to 30 percent of operational costs. The spike has prompted some major airlines to raise fares—passing the pain to their customers.

To find out if there’s any chance that SAF will be a competitive price alternative to conventional aviation fuels, we need to explore the interlinked dynamics of demand, supply, and production costs.

So, if free-market economics don’t offer much immediate price relief from SAF, what about artificial incentives? Could government programs and policies do anything to make SAF prices more attractive?

A bill currently being considered in Congress called the Sustainable Skies Act would create a federal SAF tax credit for SAF producers who blend the fuel as a way to kickstart SAF production.

“This tax policy remains the most effective method to incentivize the production of SAF,” said a statement from National Business Aviation Association president and CEO Ed Bolen. “NBAA is determined to work with all stakeholders to make a blender’s tax credit a reality.”

If you factor in CO2 taxes, experts project that the total cost of using conventional fuel in the coming decades might get so ugly that SAF might end up being a slightly more competitive alternative.

So, at least in the short term, it doesn’t appear that SAF can offer a cost-effective solution to the recent spike in oil prices. But in the future it might—especially if government policies, infrastructure, supply, and demand all align and change the equation to make the economics work. READ MORE; includes VIDEO