Global oil prices heavily influence fuel costs in Israel. Even though Bazan Group refines crude oil locally, Israel still relies on importing crude oil from international markets. When global oil prices rise due to geopolitical tensions or supply disruptions, it directly impacts the cost of fuel in Israel. In 2024, rising global demand and production limitations led to increased prices worldwide.
Bazan Group, Israel’s largest refining and petrochemical complex, plays a critical role in the country’s energy sector. However, even with local refining capabilities, fuel prices in Israel have remained high due to several factors. The reasons behind expensive fuel in Israel are multifaceted, involving global oil market fluctuations, taxes, and geopolitical considerations.
What Role Do Taxes Play in Fuel Prices?
Israel imposes high taxes on fuel, with excise duties and value-added tax (VAT) making up a significant portion of the cost. These taxes fund infrastructure and public services but also drive up consumer fuel prices. Despite local refining by Bazan, the heavy tax burden ensures that fuel prices remain high compared to global averages.
How Does Geopolitics Affect Fuel Prices in Israel?
Geopolitics plays a crucial role in influencing fuel prices in Israel. As a nation located in the Middle East, Israel is surrounded by countries that are major oil producers, such as Saudi Arabia and Iraq. However, due to political tensions and lack of formal relations with many neighboring oil-rich countries, Israel has to import crude oil from more distant markets, often at higher costs.
Instability in the region, like conflicts or sanctions against major oil-exporting countries, can disrupt global oil supply, driving up prices. When tensions escalate in the Persian Gulf or other oil-producing areas, it causes uncertainty in the oil market, resulting in price surges. This volatility is passed on to consumers in Israel, despite local refining by Bazan Group.
