Aviation Fuel Emerges as the Brightest Spot in Oil Markets

Aviation fuel is the oil market’s outlier in 2025, with jet fuel demand still climbing while gasoline and diesel level off. Airlines worldwide are flying more as travel rebounds, and new rules are pushing more Sustainable Aviation Fuel (SAF) into tanks. IATA projects a 6% rise in jet fuel use this year to 107 billion gallons, while the industry’s fuel bill is expected to total $248 billion in 2025, nearly 5% below 2024 as prices ease.

In the United States 🇺🇸, spot prices fell from an average $2.73 per gallon in Q1 2024 to $2.34 in Q3, with 2025 expected to average $2.07. The contrast is striking: aviation fuels expand as road fuels face long-term pressure from electric vehicles and efficiency gains.

Policy and mandates: the main driver

Mandates are the biggest driver behind the shift toward SAF.

• From January 1, 2025, the European Union and the United Kingdom began binding SAF blending rules.
• The EU requires 2% SAF at all airports in 2025, ramping to 6% by 2030 and 70% by 2050.
• The UK starts at 2% in 2025, rising to 10% by 2030 and 22% by 2040.

Both systems rely on verified emissions savings and tradable certificates to prove compliance. According to VisaVerge.com analysis, these policies, paired with airline purchase agreements, are giving suppliers firmer signals to invest in new plants.

Asia-Pacific governments are moving too:

• Japan targets a 10% SAF blend by 2030.
• Singapore plans 1% for departing flights in 2026, moving to 3–5% by 2030.
• China and India are building local SAF output and preparing blend goals.

In the United States, the Environmental Protection Agency’s 2025 Renewable Fuel Standard holds:

• Advanced biofuel at 7.33 billion gallons
• Biomass-based diesel at 3.35 billion gallons

New state SAF tax credits are expected in Kentucky, Pennsylvania, and Indiana.

The European Commission’s ReFuelEU framework sets a template many markets are watching. See the regulation details here: https://transport.ec.europa.eu/transport-themes/eu-air-transport-policy/refueleu-aviation_en

Supply vs demand: catching up but not enough

Global SAF production doubled in 2024 to 1 million tonnes (about 0.3 billion gallons), and output could reach about 713 million gallons in 2025. Yet that remains only a sliver of total aviation fuel use.

• IATA reports 70 airlines have committed to buy 11.5 billion gallons of SAF by 2030, indicating strong demand intent that still outpaces confirmed capacity.
• The SAF market is set to surge from $2.06 billion in 2025 to $25.62 billion by 2030, driven by large plants, new feedstocks, and long-term offtake deals.

Cost pressures and economic impact

Costs remain the hard part. SAF continues to trade at a premium to conventional jet fuel.

• IATA estimates SAF will add $3.8 billion to airlines’ fuel costs in 2025, more than double the $1.7 billion added in 2024.
• In Europe, non-compliance with blending rules can trigger penalties, raising real costs for airlines that fall short.
• The UK builds in a buy-out price to control the hit to consumers if supply is tight.

Even with falling spot prices for standard jet fuel, the SAF premium keeps pressure on budgets and could nudge ticket prices higher on some routes.

Important: The SAF premium may lead to higher fares in regions where supply is scarce or penalties are strict.

Production pathways and industry response

Producers and refiners are retooling to meet changing demand profiles.

• About 82% of current SAF capacity uses HEFA (hydro-processed esters and fatty acids), relying on fats, used cooking oil, and similar inputs.
• These feedstocks are limited, so investors are funding alternative pathways such as:
  • Alcohol-to-jet (ATJ)
  • Power-to-liquid (synthetic e-fuels)

Policymakers in the EU and UK designed mandates to slowly shift away from heavy HEFA dependence and promote these newer routes. This matters because meeting future targets will require far more supply than today’s HEFA feedstocks can cover.

“SAF is strengthening its role as the cornerstone for the decarbonization of the aviation industry. Robust policy frameworks and targeted support are essential to keep SAF growth on track,” said SkyNRG CEO Maarten van Dijk in June 2025. SkyNRG’s market outlook aligns with IATA’s view that production is accelerating but still behind what mandates and airline pledges will require.

How EU and UK systems work in practice (2025)

• Fuel suppliers blend the required 2% SAF into aviation fuel.
• They document SAF volumes and greenhouse gas savings and submit evidence.
• Authorities issue tradable certificates tied to those savings.
• Suppliers use certificates to prove compliance or trade them if they have extra.
• Penalties apply in the EU for shortfalls; the UK’s buy-out helps shield travelers.

For airline finance teams, these steps are now core to carbon accounting:

• Certificates and credits show progress toward emissions goals and help meet legal rules across markets.
• Procurement teams are locking in multi-year SAF deliveries, often linked to specific airports to align with local mandates.

Consumer effects and regional differences

Travelers will feel mixed effects:

• Positive: more routes will carry fuel with a lower carbon footprint, and carriers will promote this in booking tools.
• Negative: the SAF premium can feed into fares, especially where supply is scarce.

Regional differences matter:

• Europe’s penalties raise stakes for compliance and could translate to greater operational costs for airlines.
• The UK’s buy-out seeks to limit price spikes for consumers.

Refiners and the long-term pivot

Refiners face strategic choices:

• Some plants are shifting yields toward jet fuel to match growing demand.
• Others are converting units to produce SAF.

With gasoline and diesel no longer the growth engines they once were, jet products are taking a larger share of the slate. Analysts note this long-term pivot could reshape refining margins and trade flows through 2050.

The gap and the risk to meeting targets

Looking ahead, the main risk is the gap between goals and physical supply.

• SAF demand could triple by 2035 to 40 million tonnes (about 13.2 billion gallons).
• Projections show a 26 million tonne (about 8.6 billion gallons) shortfall unless new capacity is built.

EU and UK targets tighten sharply from 2030 and 2040 onward, with synthetic fuels expected to gain a larger role. Asia-Pacific, the Middle East, and Latin America are preparing targets and plants, but investors need confidence in stable policy and offtake deals to move faster.

Bottom line

For now, aviation’s energy story is one of momentum:

• IATA’s price and demand outlook points to affordable conventional supply in 2025.
• Mandates and airline contracts keep SAF growth in the spotlight.
• VisaVerge.com reports that firm policy, clearer certificates, and rising purchase commitments are pushing the market from pilot volumes toward commercial scale.

If governments keep incentives steady and producers deliver on new technologies, the industry could meet higher blend levels without sharp shocks to travelers. But if build-out lags, airlines may lean on buy-outs and certificates while paying more for limited physical supply—especially in regions with strict rules and busy hubs.