Iran war: The 12-hour jet fuel warning that could ground New Zealand
Monday, 23 March 2026
OPINION: The adage ‘never let a good crisis go to waste’ is relevant with increasing frequency in aviation. Following the attack on Iran by the United States and Israel, the current emergency is a doozy.
The widening war has resulted in the sharpest oil shock ever and within a week of missiles first flying, jet fuel was up by as much as 135%. Airlines responded by raising fares, imposing fuel surcharges and cutting flights.
Around the world, they are forecast to use around 400 billion litres of fuel this year. Now their biggest expense, alongside labour, threatens to spiral out of control.
Even worse, there’s a risk fuel could be rationed around the world and for relatively remote New Zealand, that spells disaster. Ministry of Business, Innovation and Employment latest figures show New Zealand has enough in-country jet fuel for 21.4 days cover.
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Before war broke out, ACT leader David Seymour took a shot at loss-making Air New Zealand’s investigation of alternative ways to power planes. Besides its battery plane trial, he criticised its interest in ‘so-called’ sustainable aviation fuel.
But now it's time to stand by for another surge in enthusiasm for alternatives to traditional jet fuel.
We’ve been here before. When prices hit historic highs of US$144 a barrel in July 2008, there was a race to find alternatives that could be dropped into aircraft without requiring engines to be modified. Airlines including Air New Zealand experimented with anything from oils squeezed from poisonous South American shrubs to oil in lip balm and shaving cream.
But oil prices fell to US$34 as the Global Financial Crisis hit and although airlines were able to prove the fuels worked when blended with traditional ones, the ‘greenrush’ was off. And, to Seymour’s point, some of the feedstock wasn’t sustainable as it displaced food crops and needed enormous amounts of water.
New aircraft technology offered a quicker path to cutting emissions per passenger (and profitability) with new generation planes such as the Boeing 787 Dreamliner and Airbus A350 offering 20% greater efficiency than the planes they replaced. Momentum wasn’t totally lost though and since sustainable aviation fuel (SAF) has been made from sources including used cooking oil, municipal waste, forestry slash and algae. While dozens of airline SAF projects have fizzled out, the green credentials of feedstocks have improved and the suitability of the alternative fuel has been proven even further with a 100% Saf flight across the Atlantic.
Still, supply hasn’t nearly kept up with what airlines want and need to meet sustainability targets. Last year SAF powered just 0.7% of flights globally, according to estimates by the International Air Transport Association.
Because of high production costs in what is a tiny industry compared to fossil fuels, and its scarcity, airlines pay between three and five times the price of jet fuel. In spite of the price, the association says its member airlines are eager to buy SAF.
“There is money to be made by investors and companies who see the long-term future,” says the association’s director general Willie Walsh.
Co-processing SAF feedstock in existing oil refineries could be a quick way of boosting supplies rather than government mandates, he says.
A study last year by Australia’s Cyan Ventures and supported by Boeing found domestic production of SAF to meet 30% of New Zealand's jet fuel needs by 2050 could generate $1.3 billion in economic activity and in create 5700 jobs.
“New Zealand has a narrow window. The current crisis has created political salience for fuel security that rarely exists,” Cyan's managing director Fraser Thompson said earlier this month.
He does favour the mandates unpopular with many airlines, but also an underwriting mechanism that could be a contract for difference (with traditional fuel), a price floor, or production incentives.
The time to act is now while the vulnerability is visible.
“That could catalyse the domestic SAF industry that no amount of high oil prices alone ever will,” he says.
Board of Airline Representatives executive director Cath O’Brien says that in an unstable geopolitical environment, where the rules based order is breaking down, energy self-sufficiency is more important than ever. Jet fuel suppliers can give 12 hours notice of rationing and that would be a severe blow to the country’s connectivity recovery.
While Australia was ahead in SAF development and the most likely source of it in the future, a domestic supply would help.
“This is looking increasingly problematic. Even if we had just 5% available fuel supplies in SAF here it would help.”
Aviation Minister James Meager agrees Australia is likely to be a regional source of SAF at scale.
Rather than being a leader in producing it, “we are a fast follower” of Australia, and there was already trans-Tasman co-operation at several levels. While he’s wary of the potential cost impact of mandates for airlines flying here, he says if there was a prospect of any domestic production the Government could possibly help by lowering regulatory hurdles to start up here.
No matter where it’s made, SAF’s time is now. Again.
This story has been updated with MBIE’s most recent figures for fuel stock cover.