Global SAF Prices Spike- India’s Window to Build Domestic Supply Is Narrowing

Sustainable aviation fuel now costs up to seven times as much as conventional jet fuel, and global supply covers barely half a percent of the world’s jet fuel demand — a gap that matters well beyond the airlines currently absorbing the bill. International SAF prices have risen roughly 10% in 2026 compared with the previous year, with the average HEFA-pathway price (the cheapest production route) reaching $1,817 per tonne, about five times conventional jet fuel, according to BloombergNEF data reported by UkrAgroConsult. Advanced bio-SAF made from waste feedstocks averaged $3,399/t, while synthetic e-SAF — made from hydrogen and captured CO2 — averaged $5,015/t.

A geopolitical price shock layered on a structural shortage

The immediate driver is the disruption to shipping through the Strait of Hormuz amid the ongoing West Asia conflict, which has pushed conventional jet fuel prices sharply higher and, because SAF is priced at a premium to conventional benchmarks, dragged SAF prices up with it. European SAF has averaged around $2,830 per tonne in the second quarter of 2026 — up 31% on the year’s average — while jet fuel in the same market has averaged roughly $1,404 per tonne since the conflict began. But the price spike sits on top of a shortage that predates the conflict: global SAF production totalled just 1.9 million tonnes in 2025, covering only 0.6% of worldwide jet fuel demand. Expanding blending mandates — the UK and EU introduced a 2% SAF requirement in 2025 — are adding demand faster than new production capacity is coming online, and BloombergNEF expects prices to keep climbing as mandates tighten and SAF competes with road-transport biofuels for the same waste-oil and biomass feedstocks.

Where this leaves India

India’s own SAF blending trajectory — 1% by 2027, rising to 2% by 2028 and 5% by 2030, initially applicable to international flights — places the country’s aviation and biofuels sectors inside this tightening global market just as it starts to bite. India is also directly exposed to the same Strait of Hormuz chokepoint that is driving the current price spike, since a large share of the country’s crude and refined-product imports transit that route, layering domestic fuel-cost pressure on top of the SAF-specific squeeze. India’s existing SAF-adjacent capacity is modest relative to what the mandate will eventually require: it rests mainly on nascent used cooking oil (UCO) collection networks and early second-generation ethanol infrastructure such as IOCL’s Panipat plant, neither of which was built with aviation-grade fuel output as the primary target.

An honest read: opportunity or exposure?

The uncomfortable framing is that India could end up entering the SAF market primarily as a price-taking importer rather than a producer, paying import-parity rates for a fuel priced at multiples of jet fuel just as its own mandate creates guaranteed domestic demand. The more optimistic framing is that elevated global prices are exactly the kind of margin signal that makes domestic SAF investment — in UCO aggregation, waste-to-fuel conversion and eventually e-SAF — more commercially viable than it was a year ago, provided capital and policy support arrive before 2027. Which framing wins out will depend less on global price trends, which are largely outside India’s control, than on how quickly domestic feedstock-collection and refining capacity gets built in the next 18 months. That is a narrower window than the 2030 target date suggests, since blending obligations begin ramping in 2027 regardless of whether domestic supply is ready.