Rising Oil Prices Threaten Israel as Fuel Nears 9 NIS per Liter
Rising global oil prices and expiring government subsidies threaten to push Israeli fuel prices to 9 NIS per liter. While Western fleets adopt strict cost-cutting measures and electric vehicles, Israeli consumers and corporate fleets remain heavily reliant on gasoline and plug-in hybrids.
Global oil prices surged last March following the closure of the Strait of Hormuz by Iran. Many believed at the time that this would be an isolated and short-lived event. Global oil reserves were at a peak, the oil industry had recovered impressively from previous conflicts, and the prevailing view was that Iran would not break ties with its neighbors in the Persian Gulf.
However, Iran and its proxies initiated a prolonged campaign of asymmetric warfare focusing on oil production infrastructure and passing tankers, recently expanding to strategic oil infrastructure in Saudi Arabia. Oil prices are once again approaching the highs of March, with several red lines remaining uncrossed, such as direct attacks on oil and gas fields. If crossed, current oil prices will serve merely as a prelude to what lies ahead.
Drivers worldwide have been bearing the cost of this warfare for months, facing an increased financial burden of travel. Yet, unlike the rest of the world, private vehicle users in Israel appear indifferent. This apathy may stem from the belief that the government will continue providing a safety net against sharp price spikes and the ongoing strength of the shekel.
The Approaching Psychological Threshold
When this safety net vanishes or shrinks significantly, potentially by the end of October with fuel tax subsidies expiring, fuel prices at gas stations are projected to climb to around 9 NIS per liter, establishing a new psychological benchmark. Across many Western nations, this threshold has already been crossed, prompting fleets and private drivers to adopt cost-cutting tactics.
The natural approach to lowering fuel expenses during record-high prices is to curtail non-essential private vehicle travel in favor of public transport. While this occurs in many developed countries, it remains a privilege of nations boasting efficient, inexpensive, and 24/7 accessible transit systems—amenities Israel currently lacks.
The next logical step is transitioning to full electric vehicles (EVs). In recent months, this shift has gained momentum in Europe and even the United States, despite the expiration of purchase incentives at the end of 2025. Theoretically, EVs could prove exceptionally effective in Israel, where travel distances are short, public charging infrastructure is relatively dense, electricity prices are relatively low, and local fuel prices rank among the highest globally.
The cost advantage favoring electric vehicles has widened significantly due to rising fuel prices. While the energy cost per kilometer for a gasoline vehicle a year ago was roughly 4.7 times higher than that of an EV charged via inexpensive home charging, the gap has now widened to 5.4 times. For public charging, the gap remains approximately 1.7 times in favor of electric vehicles due to higher public charging costs.
Fleet Management and Plug-In Hybrids
Despite these economic advantages, sales data indicate that Israeli consumers continue to shun electric vehicles, favoring hybrids and plug-in hybrids instead. Plug-in hybrid electric vehicles (PHEVs), representing the fastest-growing segment in the Israeli automotive market, are frequently viewed as an electric alternative. On paper, they promise energy cost savings of 65% to 85% per kilometer compared to conventional gasoline vehicles, according to official WLTP consumption figures.
However, their real-world fuel consumption varies drastically based on usage patterns, a subject currently at the center of fierce debate in the European Union ahead of new regulations forcing manufacturers to present more realistic data. Official WLTP consumption data assume frequent grid charging, with vehicles operating on electricity 70% to 80% of the time. Driving such vehicles under sporadic charging conditions yields real-world consumption and emission figures 2.5 to 3 times higher than manufacturer claims.
A recent study by the global ICCT organization demonstrated that plug-in hybrids frequently operating with depleted batteries—charged self-dependently by the internal combustion engine—consume four to five times more fuel than official WLTP figures, matching conventional gasoline cars.
Large vehicle fleets worldwide bear the heaviest burden from skyrocketing fuel prices, prompting aggressive cost-reduction tactics. In the United Kingdom, home to approximately 2 million fleet vehicles mostly on lease, fleets are tightening controls on gasoline vehicles using smart refueling cards, telematics systems, and real-time fuel price reporting apps.
In Israel, by contrast, the implications of soaring fuel prices remain underappreciated among fleet operators managing nearly 300,000 corporate private vehicles, many of which still run on gasoline. Between October 2025 and October 2026, the price of 95-octane gasoline at Israeli pumps surged by roughly 1.54 NIS per liter, excluding expiring subsidies. For a corporate vehicle consuming 8 liters per 100 kilometers and traveling 20,000 kilometers annually, yearly fuel costs jumped by approximately 2,460 NIS. For a fleet of 1,000 vehicles, this represents an additional annual cost of about 2.46 million NIS.
Despite these figures, the penetration of electric vehicles into Israeli fleets remains minimal, while altering employer-provided fuel benefits poses complex labor relations challenges. Whether rising prices will force a structural shift remains to be seen.
