Sustainable Aviation Fuel Could Buffer Airlines from Energy Spikes

by Robert Silk (Travel Weekly) Sustainable Aviation Fuel (SAF) isn't a topic that generates exciting headlines. But one of the many lessons from the oil shock of the Iran war is that SAF matters, and not only because it's critical to decarbonize aviation. It also matters because travelers and airlines, in the U.S. and around the world, will be less exposed to energy price jolts if SAF production reaches scale.

In the U.S., approximately 300 million gallons of SAF was produced in 2025, up about two-and-a-half times from 2024, according to Ethanol Producer magazine. In relative terms, that number is small. U.S. airlines consume approximately 20 billion gallons of fuel per year.

But industry insiders fear that SAF production levels could actually decrease this year without a renewed incentive push from the federal government.

Fortunately, it's a problem that a pair of bipartisan bills, one introduced in the House in December and the other introduced in the Senate in February, would tackle.

Under a program that ended in 2024, SAF purchasers were able to claim credits of up to $1.75 per gallon for SAF. In its place is a program delineated in last summer's "One Big Beautiful Bill," which provides a credit to producers but caps it at $1 per gallon, the same amount as is provided for production of other clean fuels, most notably renewable diesel.

In refineries, SAF competes with renewable diesel, but absent additional incentives it doesn't stand much of a chance. The market for SAF is smaller. And renewable diesel production already benefits from economies of scale that SAF does not. With SAF right now costing more than $7.50 per gallon on the U.S. West Coast, according to the Argus Fuel Index, it needs the demand boost that would come from lower prices.

Absent the extra tax credit, producers are likely to dedicate their limited refinery space more heavily toward renewable diesel.

A few producers in the U.S. emphasize SAF, most notably Montana Renewables, which expects an expansion of its Great Falls facility to increase its production pace from 30 million gallons per year currently to up to 150 million gallons per by the end of this year.

But the biggest sources of last year's SAF production surge were launches by Phillips 66 and Valero.

Members of Congress recognize the potential for SAF production to flag, even as airlines have sounded the whistle about the peril of not being able to achieve the global target of net-zero airline emissions by 2050 as well as shorter-term emissions-reductions goals.

The House and Senate bills would restore the SAF credit to a maximum of $1.75 per gallon and extend it through 2033. The expected result would be demand for SAF increasing on the back of lower prices.

"It will provide confidence for new investors and production facilities," Scott Lewis, a division president for World Energy, which in February entered into a SAF transport logistics agreement with Montana Renewables, told me.

Lewis also offered what I consider some good news. Despite the U.S. political climate that has shifted away from green initiatives, World Energy hasn't seen dampened demand from corporate customers, which make SAF purchase commitments as part of their own carbon reduction goals.

Renewing the $1.75 tax credit should ensure more future commitments. And though SAF is far too nascent to make any impact on the current energy shock, it could one day alleviate the global aviation industry's exposure to an external event like the Iran war while boosting U.S. energy independence. READ MORE