Price Coupling Thwarts SAF's Potential to Displace Fossil Fuel
As governments worldwide push to decarbonize, Sustainable Aviation Fuel (SAF) has emerged as a promising solution. But despite its potential, SAF's ability to displace fossil fuel is being hindered by price coupling.
The issue arises because SAF's pricing mechanisms are tied to those of conventional jet fuel, making it vulnerable to oil market volatility. When the price of oil rises, so does the price of SAF, forcing airlines to buy at higher costs.
This problem is exacerbated by the fact that there is no usable SAF market benchmark, a key requirement for traded liquid fuels. As a result, SAF prices are often tied to those of Brent, Jet A1, or Gasoil, rather than being based on its own unique characteristics.
The lack of volume growth has also contributed to this issue. Currently, around 500 million litres of SAF are sold annually, far short of the 500 billion litres needed to meet net-zero targets by 2050.