Welcome back to our latest edition of Market Insights with Sanjeev Kaushik.
In this edition, we take you into the future of jet fuel demand—one that is yet to clear the turbulence. Will the global rebound in air travel ignite unprecedented demand, or will emerging green technologies shift the trajectory?
As we look toward 2040, you’ll discover the forces driving jet fuel’s rise and the looming challenges. Is the future of jet fuel demand cruising toward massive expansion, or could it face an unexpected descent? Which companies will be impacted by these shifts?
Buckle up as we uncover what’s really fueling the skies ahead…
Today at a glance:
- Is Jet Fuel Facing Its Final Descent?
1.1 The Pandemic’s Disruption
1.2 Back on Track
1.3 Air Passenger Growth: The Main Tailwind
1.4 The Efficiency Factor
1.5 Roadblocks to a Green Future
1.6 Risks and Opportunities
1.7 Top Companies Bracing for Jet Fuel Trends
1.8 Jet Fuel Demand Set for Steady Growth - Investing for Long-Term Wealth Creation
1. Is Jet Fuel Facing Its Final Descent?
As the world emerges from the turbulence of the Covid-19 pandemic, the aviation sector, once grounded by travel restrictions, is regaining altitude.
In the latest Energy Tomorrow report by Goldman Sachs, jet fuel is set to have a fascinating future. While the pandemic hit jet fuel harder than any other oil product—causing demand to plummet by over 40% in 2020—the recovery has been remarkable.
1.1 The Pandemic’s Disruption
Among the key drivers of global oil demand, jet fuel was hit the hardest by the pandemic. In 2020, as international borders closed and flights were grounded, the demand for jet fuel plunged by an unprecedented 40%.
World jet fuel demand remains 15% below Its pre-pandemic GDP-adjusted trend.
Even today, jet fuel consumption remains 15% below its pre-pandemic trend, reflecting lingering economic impacts. Yet, while the pandemic deeply scarred the level of demand, it did not disrupt the pace of structural growth.
The rebound in global air travel is already underway, and jet fuel has been the primary driver of oil demand growth over the past three years.
1.2 Back on Track
Looking ahead, the long-term outlook for jet fuel remains promising. Despite the lingering effects of Covid-19, the report forecasts a steady climb in global jet fuel demand through 2040.
Jet fuel demand to keep growing through 2040, says Goldman Sachs.
With an expected increase of 0.4 million barrels per day (mb/d) in 2024 alone, the aviation industry continues to rebound, bolstered by rising air passenger numbers and increased freight activity.
By 2040, global jet fuel demand is expected to grow by 45%, reaching 10.3 mb/d.
Several key factors are expected to drive this growth. First, the steady increase in air passenger flows, particularly in emerging markets (EMs), will fuel demand for aviation services. Second, while advances in airplane fuel efficiency and alternative fuels like Sustainable Aviation Fuel (SAF) will somewhat mitigate jet fuel consumption, these efforts will not be enough to fully offset the rising need for jet fuel.
1.3 Air Passenger Growth: The Main Tailwind
One of the most compelling drivers behind the forecasted jet fuel demand growth is the continued rise in air passenger numbers.
Global air passenger flows are set to double by 2040 compared to 2023 levels, with particularly strong growth in emerging markets. Over the next five years, air travel is expected to grow by 5% annually, before decelerating to a still-solid 3% per year by 2040.
Income increases continue to significantly boost demand for air traveling.
In developed markets (DMs), growth will be slower, as the aviation industry has already matured. In these regions, jet fuel demand is projected to peak around 2036, with an earlier peak in places like the OECD Asia Pacific region.
However, the story is quite different in emerging markets. Rapid population growth, rising incomes, and increased air travel adoption are expected to fuel an 8% annual increase in passenger numbers throughout the rest of this decade.
1.4 The Efficiency Factor
While demand for air travel is soaring, advances in fuel efficiency will play a crucial role in moderating jet fuel consumption. Each new generation of aircraft is about 15-20% more fuel-efficient than its predecessor, thanks to technological improvements like geared turbofan engines and lighter materials. This ongoing trend is expected to reduce jet fuel demand by 130,000 to 170,000 barrels per day annually through 2040.
Sustainable Aviation Fuel (SAF) will also play a role in shaping future demand. SAF currently accounts for less than 1% of aviation fuel, but governments in both emerging and developed markets have set ambitious targets for SAF adoption.
The European Union aims for SAF to make up 6% of aviation fuel by 2030, growing to 70% by 2050. Similarly, China is pursuing a 5% SAF share by 2030. However, despite these goals, SAF production faces significant challenges, including scarce plant-based and waste-based feedstock, as well as high production costs for synthetically derived SAF (e-SAF).
In the base case scenario, analysts expect Sustainable Aviation Fuel to account for 9% of total aviation fuel by 2040.
But achieving net-zero emissions by 2050 will require a much more aggressive pace of SAF adoption—four times faster than current estimates. While this accelerated pace could help reduce jet fuel demand earlier, reaching such targets will require significant investment and innovation in SAF production technologies.
1.5 Roadblocks to a Green Future
Despite the growing urgency around reducing aviation’s carbon footprint, SAF adoption faces numerous roadblocks.
One of the biggest challenges is the cost.
Biodiesel-based SAF is nearly three times more expensive than traditional jet fuel, while e-SAF costs can be up to eight times higher. These price differentials pose a significant hurdle to widespread adoption, as airlines would need to pass these costs on to consumers in the form of higher ticket prices.
The report suggests that under current SAF adoption scenarios, airfares could increase significantly, reducing global air passenger traffic by 4% by 2040.
In a more aggressive scenario where SAF adoption happens four times faster than expected, global air travel demand could fall by as much as 6%, creating a notable drag on jet fuel demand.
However, if technological breakthroughs can bring SAF costs closer to parity with traditional jet fuel, these impacts could be mitigated.
1.6 Risks and Opportunities
Emerging markets to drive steep air passengers growth.
While the long-term outlook for jet fuel demand is generally positive, the road to 2040 is not without its risks.
Technological advances, climate policies, and the pace of SAF adoption will all play a critical role in shaping future demand. In particular, the adoption of SAF has the potential to significantly alter the trajectory of jet fuel demand.
Faster SAF adoption could lead to an earlier peak in demand by 2034, while slower adoption could allow demand to continue growing through 2040.
At the same time, strong growth in air passenger traffic, particularly in emerging markets, will continue to drive demand for jet fuel in the near term. This demand growth is expected to support higher refinery margins for middle distillates, even as the industry faces structural constraints on refining capacity.
1.7 Companies Bracing for Jet Fuel Trends
The future of jet fuel demand will have a significant impact on several major global companies, each playing a unique role in the aviation industry’s transition.
Shell and BP, both UK-based, have been long-standing providers of aviation fuels and services, with BP having operated in India for over 75 years.
US oil giants ExxonMobil and Chevron Corporation will also face shifts, as demand for traditional fuels continues alongside the rise of Sustainable Aviation Fuel (SAF).
TotalEnergies, a French energy company, and Neste, a Finnish leader in renewable fuels, are positioning themselves to capitalize on the transition to greener alternatives.
Gevo, Inc., focused on biofuel and renewable chemicals, and Honeywell International, a key innovator in aviation systems and fuel efficiency, stand to gain from the industry’s push for sustainability.
Johnson Matthey, a British company specializing in sustainable technology, will be pivotal as the world accelerates toward low-carbon solutions in aviation.
Lastly, Rolls-Royce, a key player in aircraft engine manufacturing, is working on fuel-efficient turbofan engines that can help airlines manage consumption, placing it in a pivotal position as the demand for operational efficiency grows.
1.8 Jet Fuel Demand Set for Steady Growth
The future of jet fuel demand looks bright, with global consumption expected to climb steadily over the next two decades.
While the aviation industry faces challenges in terms of fuel efficiency and the adoption of alternative fuels, the relentless growth in air travel—particularly in emerging markets—will continue to propel demand for jet fuel.
As the industry navigates the transition to more sustainable fuels, the next decade will be crucial in determining whether the skies remain as energy-hungry as ever or if green alternatives will finally take flight.
In any scenario, the next two decades promise to be transformative for aviation, jet fuel, and the broader energy sector.
2. How to Invest for the Long Haul!
Get exclusive insights on building lasting wealth as Sanjeev Kaushik interviews Advait Arora, a seasoned investor who has navigated both Indian and international markets for over two decades.
From proven strategies to insider tips, discover the secrets that could transform your financial future!
1 thought on “The Future of Jet Fuel: Taking Off Towards 2040”
I all the time used to read piece of writing in news papers but now as I am a user of web so
from now I am using net for articles or reviews, thanks to
web.
Here is my webpage … https://www.cucumber7.com/