The three prices of SAF

SAF pricing operates through three overlapping layers: production cost (feedstock- and process-driven), market pricing (largely benchmarked to jet fuel), and policy pricing (mandated compliance or buy-out levels), and these rarely align. The market is fragmented by design and maturity: HEFA has partial price discovery via liquid feedstocks, while advanced pathways like ATJ, Fischer–Tropsch and power-to-liquids rely on opaque, bilateral pricing with limited benchmarks. Airlines, producers and regulators each anchor value differently, creating a structural “squeeze” where SAF is simultaneously pulled toward jet parity, constrained by mandates, and influenced by emerging carbon-value separation mechanisms. The price of sustainable aviation fuel is meant to signal a transition away from fossil dependence. In practice, it does something more complicated: it mirrors the old oil system while trying to replace it. Over the past few weeks, a debate among developers, traders, financiers and airlines has converged on a shared unease. The issue is not simply that SAF is expensive. It is that the same fuel appears to have three different prices at once, depending on where you stand in the value chain. At the point of production, SAF looks increasingly like a conventional industrial commodity. Costs are driven by feedstocks such as used cooking oil, tallow and other renewable oils, alongside capital expenditure, hydrogen input and operating costs. In this framing, pricing is relatively insulated from crude oil. A plant’s economics are anchored instead in access to feedstock and the efficiency of conversion. Yet that clarity fades quickly once the fuel enters the market. In the voluntary trading environment, SAF is still largely priced against fossil jet fuel. Airlines, which report fuel as their largest single cost, tend to benchmark purchases against jet parity. That creates a powerful gravitational pull: even when SAF’s underlying production costs diverge from crude-linked inputs, its traded price often does not. “Jet remains the reference point,” as one industry executive puts it. “Everything eventually gets translated back into that number.” The result is a hybrid pricing system that behaves less like a single commodity market and more like a set of overlapping ones. A third layer sits above both: regulation. In mandated markets, compliance obligations effectively establish a ceiling price, particularly in jurisdictions where producers can opt out of compliance by paying a buy-out fee. In the UK, for example, that figure has been cited in the range of US$22–25 per gallon, significantly above both production cost and voluntary market levels in many cases. Taken together, these three reference points, production cost, market pricing and policy compliance, do not align. Instead, they form a triangular structure in which SAF is simultaneously pulled downward by cost efficiency, sideways by jet fuel benchmarking and upward by regulatory obligation. The effect is a pricing environment that can appear contradictory. When crude oil rises sharply, jet fuel follows and SAF often moves in step, even if renewable feedstocks remain stable. The connection is not physical so much as financial: the benchmark drags the price with it. But this is only part of the picture. SAF itself is not a single product in the way jet fuel is. It spans multiple production pathways, from hydroprocessed esters and fatty acids (HEFA), which currently dominate commercial supply, to emerging technologies such as alcohol-to-jet, Fischer–Tropsch synthesis and power-to-liquids. These pathways sit at different stages of maturity, with very different cost structures and levels of price transparency. HEFA benefits from relatively visible feedstock markets, particularly in used cooking oil and tallow. Other pathways do not. For them, pricing is still negotiated bilaterally, often without a reliable external index. The result is fragmentation within the SAF category itself: multiple fuels, multiple cost curves, and only partial comparability. On the demand side, airlines face a different constraint. SAF purchases are not only a question of cost, but of reporting, compliance and public commitments. Yet procurement systems are still built around jet fuel accounting. That encourages an implicit ceiling: SAF is often judged not on its decarbonisation value alone, but on its premium relative to fossil jet. This creates what some in the industry describe as a squeeze. Voluntary buyers pull prices toward jet parity, while mandated markets set upper bounds through compliance thresholds. In between sits the producer, attempting to recover costs that are only partially connected to either reference point. There is also a further complication: SAF is increasingly understood as carrying two distinct values. One is the energy molecule itself. The other is the associated carbon reduction, which can in principle be separated and traded independently through book-and-claim sys