This Was Supposed to Be SAF’s Moment: The Sequel
A synthesis of what developers, offtakers, traders and airlines and the broader renewable fuel community added to the discussion, and what the conversations surfaced.
A few weeks ago I argued that the Strait of Hormuz crisis exposed a tension the SAF industry tends to step around: SAF’s production looks decoupled from fossil fuel, while its price does not. Brent moved from roughly $61 to above $114 a barrel, jet fuel in North America rose sharply, and SAF prices followed, even though used cooking oil, tallow and other renewable oil feedstock costs barely moved.
The thread that followed, from people who build SAF projects, finance offtake deals, sell and buy this fuel, is aggregated below. What it surfaced is that the gap is not one single or simple, or my favorite: elegant mismatch but a set of them, sitting at three levels or viewpoints: what SAF costs to produce, how the market builds its price, and the level a mandate sets. And depending on which viewpoint you’re looking from, you build a view of the market, missing the other ones, which also exist, just hidden from your view point. A snapshot of how the market appears to behave today, drawn from one crisis and one point in SAF’s evolution.
“SAF” may not be one market, and the benchmark seems to know it
“SAF is not one uniform commodity, even if the market often treats it that way,” wrote Carlos Castillo, who has spent a career in aviation-fuel operations. The pathways are not only chemically different; they sit at different commercial stages with very different price discovery. HEFA appears to have some liquidity (less than gasoline/jet, but significantly more than e-fuels). Used cooking oil has been trading in the region of $1,075 a tonne across China, Indonesia, Malacca and ARA, alongside tallow, POME, PFAD and the grease complex, so a HEFA cost build-up is at least constructible. For alcohol-to-jet, Fischer-Tropsch and power-to-liquids, there isn’t yet a commercially sizeable second-generation index production cost linked with the underlying feedstock across those non-HEFA SAF pathways, yet. A developer can sign a bilateral deal with a logger or a row-crop grower, but the next developer often starts from scratch, because that price rarely becomes public. As Nikunj Nangalia of Essar Future Energy put it, the SAF indices have not matured the way fossil jet indices have, and they may not yet reflect the actual cost of production. So when we say “the SAF price,” we may be averaging across products that do not share a cost curve, and in many cases do not have a market price at all. Carlos also pressed the downstream side of this, the blending, logistics and certification realities a single price can hide, which is a dimension I took up in an earlier piece, “Beyond the Refinery Gate.”
The airline’s ceiling looks like an accounting decision
Airlines tend to reconcile SAF purchases against jet, and not only out of habit. Jet fuel is every carriers’ single largest cost line; their annual reports disclose an average fuel price per gallon; much of the internal apparatus is built to manage to a jet number. In the voluntary market that can create a soft ceiling, where a buyer under pressure to show “jet parity” may pull a cost-plus quote back toward a jet anchor, even when the cost build-up has little or no jet input. Michael Fulton, FedEx Chief SAF Guy, described the buyer’s side: much of the industry has shifted from financial hedging toward dynamic fuel surcharges and the monetization of environmental attributes, while still buying on contracts tied to jet-fuel indices. If that is broadly right, the benchmark is not only a market convention; it is partly wired into how the buyer is measured.
The producer’s floor looks like a road-fuel decision
Phil Moore, Global Head of SAF at EcoCeres, offered a correction worth sitting with: in this episode the spread did not move one-for-one. By his account SAF rose less than jet, closer to 1.5x Jet A1 than the 2.5x multiplier many had penciled in, which made European compliance cheaper than some feared. One reason is the other molecule in the room. SAF and HVO (renewable diesel) come off the same hydrotreatment process, so a producer will tend to make SAF only if it clears HVO parity (diesel plus penalty avoidance); otherwise the economics point toward road fuel. HVO is itself a drop-in for diesel and tends to price above fossil diesel. If that holds, gasoil volatility can enter SAF not only through the airline’s benchmark but through the producer’s opportunity cost, so even a “decoupled” producer is weighing a fossil-indexed decision day to day.
The squeeze, and the price a mandate sets
Put the producer’s floor and the airline’s ceiling together and a third level appears, the one the thread kept circling back to: the mandate. Voluntary demand may pull SAF down toward jet parity from one side, while mandated markets can cap it from the other, because once a compliance buy-out exists it is itself a price. The UK’s sits in the region of $22 to $25 a gallon, well above what the fuel costs to produce (at least for HEFA SAF) or what the market currently builds, so the same molecule can carry three prices at once: a production cost, a market price, and a mandate price. Production economics below that buy-out line risk being compressed against the ceiling rather than rewarded. Arnaud Namer, CEO of ATOBA energy, framed the financing consequence carefully: balance-sheet HEFA incumbents can reasonably pursue spot margin during a crisis, consistent with their fiduciary duty, while new entrants without a balance sheet may need long-term cost-plus offtakes to reach FID at all, because a SAF-indexed price does not obviously guarantee the returns that get a plant financed. The same benchmark that lets incumbents capture upside could make it harder to finance the next generation of capacity, and neither side of that squeeze lets the underlying feedstock cost structure show through.
Perhaps two products wearing one price tag
Several contributors returned to a point I have written about before, in “SAF Has Two Values. They Are Priced in Disconnected Markets”: SAF carries an energy value and a separate carbon value. Patrick Edmond of Future Energy Global and Alastair Blanshard of ICF put it in contracting terms, that SAF can be read as two products, energy molecules and emissions reductions, bundled onto one invoice. Jet pricing may set a floor for the energy molecules, while the carbon attribute should not price below zero and, on most days, would sit above it. Separating them is already possible today through book-and-claim, which lets the carbon value be priced on its own terms rather than bundled with the molecule. Blanshard sketched a possible route: more offtakes that accept SAF-indexed rather than jet-indexed contracts, hedging infrastructure that prices the new risk profile, and a move toward advanced SAF that supports fuller decoupling. Edmond added a useful counterweight: the molecule may never fully escape jet, because if jet ever rises above the SAF molecule, an arbitrage to sell that molecule at jet pricing reappears.
The buyer’s view: affordability and policy certainty
Airlines continue to evaluate and sign offtakes, but the threshold question is affordability, not idealism: does a deal make sense for the business. What they want is not necessarily jet parity but a credible competitive price curve, evidence of how a producer optimizes feedstock, electricity, process integration and brownfield assets to deliver both a competitive cost and a carbon intensity that meets their sustainability and net zero requirements. What is shifting now is the narrative, toward practical initiatives that deliver decarbonization rather than headline pledges.
Some have proposed a harmonized SAF price, but harmonization does not look realistic today. Mandated and voluntary markets run on different dynamics, prices and policies, and across both sit different pathways with their own feedstock and energy-input drivers. A workable starting point could be creativity in deal structuring, paired with building transparency wherever possible across the SAF value chain. Whether the structure is a collar, jet pricing bounded within a collar, spot exposure or a product swap depends on conditions at the time.
Underneath all of it sits policy certainty. Europe’s mandates give producers a long runway: ReFuelEU Aviation is legally binding and rises from 2% in 2025 to 6% in 2030, 34% in 2040 and 70% by 2050, while the UK mandate climbs from 2% to 22% by 2040, a decade or more of visibility that underwrites financing, which is much of why capacity is deploying in Europe. The US offers incentives; the 45Z clean fuel production credit currently runs only through 2029, with the SAF top-up trimmed from $1.75 to $1.00 a gallon. That horizon is hard to underwrite a plant against, so US producers rely on regional optimization, lining up airline operations, pipeline access and state credits, as in American Airlines’ offtake with Valero into Chicago O’Hare, with Google taking the carbon attributes via book-and-claim and an Illinois state SAF credit helping the economics.
Mandates, incentives, either, or: there is a place for whatever mechanism most effectively delivers both decarbonization and real production, and value varies by player and region. Policy certainty, more than a perfect price, is what trickles down into clarity for deals.
What action could look like
Denis Pchelintsev, Ph.D. described an architecture several others gravitated toward: a hybrid contract combining a cost-plus floor anchored to real production economics, a carbon-intensity component that pays for verified performance, and regional feedstock differentials, so the premium flows toward verified CI, feedstock flexibility and supply-chain robustness rather than fossil exposure.
Versions are already being tried. William Moore’s JetBio is exploring SAF pricing tied to the Brazilian ethanol market; EcoCeres offers buyers a basket of structures (Argus-floating, jet-plus-differential, fixed, or hybrid). Long-dated deals are doing in private what no public benchmark yet does: IAG with Infinium and Twelve, American Airlines with Infinium’s Roadrunner, and SkyNRG’s DSL-01 in the Netherlands, reported as the first commercial-scale SAF plant with non-recourse project financing anchored on a KLM offtake.
