עברית   عربي
Areas of Responsibility

Israel’s Fuel Economy

Fuel is the driving force behind the Israeli economy, and behind the global economy in general, whether directly, in the form of the petrol we use to fuel our cars, and whether indirectly, in the form of the fuel oil that powers our power stations.
Fuel is a vital resource for all aspects of modern-day living – our domestic life, in the office, in our factories, military operations, hospitals and any other place that requires energy for mobility, lighting, heating and any other purpose. In addition, fuel is used as a raw material for a wide variety of products.
The Ministry of Energy and Water Resources is charged with ensuring the existence of a modern fuel economy, which provides for the economy’s needs reliably and efficiently, facilitates fuel standardization to secure environmental protection, endeavors to promote competition and customer service, and prepares for various scenarios, including emergency situations.
Israel is a fuel-poor country, and is forced to refine most of the fuel products it requires using imported raw petroleum, or otherwise to import ready-made fuel products. Due to its dependence on importation, as well as to the significant role fuel plays in the economy, and the complex safety and environmental aspects of its use, the Israeli fuel economy is subject to comprehensive governmental regulation.
The frequent vicissitudes and crises in our region enhance our strategic need for finding alternative energy sources that are more reliable and cost-effective. The Israeli government strives to decrease our petroleum dependency, as petroleum remains a resource mostly produced in countries that are unfriendly or even hostile towards us. It attempts to do so by way of utilizing natural gas, solar energy, and other energy sources, instead of fuel.
The foundations of the Israeli fuel economy were laid down during the British Mandate, in the course of which the Haifa refineries were constructed (1938), and storage containers and infrastructures were established for transporting fuel by sea. Following the establishment of Israel, the responsibility for maintain the fuel economy was transferred to the Israeli government, which supervised price rates, margins and prices for all production and supply chain components via the Fuel Department, operating under the auspices of the Ministry of Finance’s Customs and Excise Tax Department.
In 1956 the Customs and Excise Tax Department transferred to Jerusalem, whereas the Fuel Department remained in Haifa as an independent unit directly subject to the Ministry of Finance. In 1977 the Energy and Infrastructure Ministry was founded and the Fuel Administration was consequently assigned to it.
1988: Fuel Economy Reform
Until 1988 Israel contained three fuel distribution companies (Paz, Sonol and Delek), and four gas companies (Pazgas, Amisragas, Supergas and Petrolgas), who endured low profitability and operated without substantial competition. Out of the realization that deep government involvement damages the fuel economy’s efficiency as well as service levels and consumer prices, the government had resolved upon a comprehensive fuel economy reform.

The reform was enacted in 1988, and was designed to achieve the following objectives:

  • Revoking customs and dividing the market between veteran fuel companies
  • Exposing the fuel industry to new fuel companies
  • Creating a free fuel market, while maintaining service level and price competition, in an effort to reduce consumer prices
  • Reducing government intervention and minimizing centralization
  • Free importation of fuel products
  • Preventing discrimination in petroleum product supply
  • Providing state-wide infrastructure services for entities operating in the industry.


The reform was carried out gradually: in 1988, the “Dinstein Edict” was revoked. The Edict regulated the commercial division between the large fuel companies. Following the revocation, a new policy was consolidated in which the new fuel companies were formally acknowledged. In 1990, the “facility prices” of fuel oil, kerosene and diesel oil were abolished, and in 1993 regulation of kerosene and diesel oil consumer prices was terminated. 
In the first decade of the 21st century, due to regional competition in issuance services provision, the amount of regulation on issuance rates was reduced, and in northern Israel, the regulation of this service was effectively abolished. Due to the decentralization of refineries and their privatization, regulation was also removed from BAZAN (Oil Refineries) rates applicable to most fuel products.
The Present: an Innovative and Competitive Fuel Industry
The reform succeeded in achieving most of its objectives, and the State of Israel enjoys today an innovative and competitive fuel economy, which functions at a globally-accepted standard in all aspects:
Fuel Companies
A company that intends on participating in the fuel industry is obligated to join the Fuel Administration Registry, as mandated by the Arrangements Law of 2001.
In addition, a company intending on importing or directly purchasing fuel from refineries must contact the Customs and Excise Tax Department in order to receive a “Fuel Manufacturer” license. 

Infrastructure Companies
Currently, Israel hosts three infrastructure companies:

  • Petroleum & Energy Infrastructures Ltd. (PEI): Israel’s national infrastructure company for the Israeli energy economy (100% government-owned). This company handles port services for importation and exportation; storage, conductance and supply of fuels, mostly of distillates, to all parts of the country; handling raw fuel products and distillates, and issuing to mobile containers. Oil Products Pipeline Ltd. (OPP), a subsidiary of PEI, deals with planning, establishing, operating and maintaining distillate conductance systems.
  • Eilat Ashkelon Pipeline Co. Ltd. (EAPC): The company acts as a overland bridge for raw petroleum transport from the Red to the Mediterranean Seas and vice versa, using three pipelines: the 42” pipeline, 254 kilometers in length, stretching from the Eilat Petroleum Port to the Ashkelon Petroleum Port, and two lines feeding the refineries in Haifa and Ashdod. The company operates two petroleum ports and two assemblies, and also provides long-term storage and fuel mixture processing services, as well as infrastructure services for LPG, fuel and coal products.
  • The Pi-Glilot Fuel Partnership: deals with storing and issuing fuel in three terminals: Be’er-Sheva, Ashdod and Jerusalem.


Most infrastructure rates are regulated. This regulation has changed in nature through the years. Until the Fuel Economy Reform (1988), regulation was based on the Cost Plus method, and was carried out in accordance with inter-company agreements. In 1995, infrastructure rates were determined according to a normative basis (the Doron Commission), and in 2000 a further revision of infrastructure rates was carried out (the Boaz Commission).
Production and Refining
Israel maintains two refineries:Oil Refineries Ltd. (BAZAN) in Haifa, established by the British in 1938; and the Ashdod Refinery, which began operations in 1973, and is currently owned by Paz Company. 
In the past, both refineries constituted a single state-owned company, which was later split into two companies and was privatized in 2006-2007. Following the split and privatization, substantial changes occurred in working methods and the methods of regulating the prices of the two refineries.
Until 1988, the majority of the refineries’ operation was defined as that of a “refining contractor”, which refines fuel products for the gas companies using raw petroleum owned by them, in exchange for refining fees. Refineries were then allowed to import raw petroleum independently, and today the majority of their operation is focused on producing petroleum products using raw petroleum in their possession, and selling their various fuel products.
At the same time, the method of regulating refinery prices was also altered. Until 1988, fuel companies paid refining fees to the refineries, the rate of which was determined in inter-company agreements based on the Cost Plus method. As of that year the price of fuel products sold by the refineries was determined per the international Mediterranean price.
Gas (LPG) Distribution Companies
The 1989 Arrangements Law opened the LPG market to competition, and later on (in 1990-1991), regulation on consumer gas prices was abolished.
Due to the safety aspects of LPG consumption, the awareness to which was enhanced greatly due to the great fire in Kiryat Ata’s storage facilities in 1988, in 1989 the Gas Law (Safety and Licensing) was enacted, determining various safety rules, and the Gas Administration and the Oversight and Safety Department were established.
Applicants intending on participating in the LPG industry must receive a license from the Ministry of Energy and Water Resources’ Gas Safety Affairs Officer. There are currently some 30 licensed gas companies in operation.
Fuel Supply Chain
Fuel makes its long way from the wells in which it is drilled as raw petroleum, and onto the end consumer at a gas station, factory or domicile. The first station is the oil well or gas field. Thus far, commercial oil quantities were never found in Israel, and the economy is based on imported raw petroleum. In 2009-2011, vast quantities of natural gas were found in marine drillings off the Israeli coastline.
From the production site, the raw petroleum is transported by tankers to designated petroleum ports, designed both to receive and to issue raw petroleum distillates. Next to the port, raw petroleum is stored in vast containers, from which it is conducted to the refineries. Following the distillation process, the petroleum is then relayed to designated storage containers, containing only finished petroleum products, or is directly relayed to the storage and issuance facilities and to large consumers such as power plants, military bases and airports. The fuel companies convey the distillates to their own storage facilities, from where they transport them by mobile tankers to the various gas stations and other issuance facilities, where they are then purchased by the end consumer.
Factors Influencing the Fuel Economy
The fuel economy is a complex and sensitive system affected by a large variety of local and international factors.

Israeli Factors

  • Refineries and infrastructure and storage companies
  • Fuel companies, headed by the leading companies Delek, Paz, Dor Alon and Sonol
  • Large consumers such as the Electricity Company, the Ministry of Defense, Egged, shipping and industrialists’ organizations
  • The government, which regulates fuel economy prices and acts to increase economic competition and to protect the consumer
  • Social organizations such as consumer and environmental protection organizations
    Global Factors
  • Changes in oil demand due to economic growth in developing markets
  • Changes in oil supply and prices, as a result of production regulation by OPEC countries, etc. extent of oil reserves, oil prospecting and oil transport capacity
  • Geopolitical changes, such as world crises, natural disasters, wars and terrorist activities
  • Technological developments in producing and preserving energy
  • Environmental standardization and legislation in Europe and other parts of the world, mandatory for Israel as well
  • Accelerated development of fossil fuel alternatives (biodiesel, ethanol, methanol)
  • Increased awareness to environmental issues
Public and Governmental Regulation

​The complexity and vitality of the fuel economy necessitate extensive regulation, which ensures regular and reliable fuel supplies, especially during emergencies. Following are the chief regulatory organizations a description of their scope of responsibilities:

  • Ministry of Energy and Water Resources: overall responsibility for supplying fuel products to the Israeli economy, market regulation, promoting competition and organization the economy in cases of emergency. The Ministerial Fuel and Gas Administration oversees, inter alia, the quality of fuel and its consumer prices.
  • Ministry of Transport and Road Safety: adapting fuel standards to automobile manufacturers’ requirements; cooperation with the Ministry of Energy and Water Resources in matters of licensing, standardization and control; regulating fuel tanker road traffic.
  • Ministry of Finance: Determining excise tax rates imposed on fuel products. The Ministry is involved in governmental policy-making in regards to the fuel economy and competition enhancement.
  • Ministry of Environmental Protection: reducing air and soil pollution due to fuel product consumption, among others, by way of formulating emission standards for automobiles and licensing gas stations and fuel storage and conductance facilities.
  • Ministry of Industry, Trade and Labor: Fuel standards and their formal status are determined by the Standardization Director; licensing for petroleum storage; licensing and operating the Consumer Rights Protection Authority; calibrating meters at fuelling pumps and ensuring occupational safety in fuel facilities, gas stations, terminals and other locations.
  • Ministry of the Interior: Approving the establishment of gas stations per National Outline Plan 18 (TAMA 18), via business licensing authorities and municipal planning authorities, local, regional and Galilean councils.
  • Standards Institution of Israel: Preparing and promulgating fuel standards.
Governmental Fuel Companies
Raw Petroleum
Raw petroleum is the primary raw material used for energy production, from which petrol and diesel oil are refined for transportation purposes, and is also used for producing cooking gas, fuel oil for electricity generation and other industrial products. The petroleum is drawn from terrestrial and marine drilling facilities and is conveyed by tankers or pipelines to the refineries.
Approx. 60% of all the world’s oil reserves are found in the Middle East, mainly in Saudi Arabia and the Persian Gulf Emirates. Other large producers are Russia, the United States and Norway. The continuously rising demand for oil, in conjunction with various global vicissitudes and geopolitical crises result in steep oil price increases, and thus in harming regular supply. Therefore, recent decades have seen a global effort to develop alternative energies and to reduce economic and political dependency on oil sources.
Israeli petroleum is mostly imported from former Soviet nations, via the Baku-Tbilisi-Ceyhan (BTC) pipeline, connecting the Caspian Sea with the Mediterranean, and passing through Georgia and Turkey.
Fuel Products and Usages
Israeli energy consumption is based on two primary sources: electricity and fuel (petroleum products). Petroleum products constitute approx. 75% of general consumption, used in part also for electricity generation.

Following is a list of common Israeli fuel products and their usages:

  • Cooking Gas – Liquefied Petroleum Gas (LPG): used for three purposes:
    Heating and cooking for the domestic sector, as well as the industrial, commercial and military sectors
    Inputs for petrochemical industries.
    Motor vehicles (LPG for transportation compliant with motor vehicle standards)
  • Naphta: a petroleum product, used mostly as industrial petrochemical inputs
  • Petrol: terrestrial transportation, mostly private vehicles
  • Diesel Oil for Transportation Purposes: mostly heavy and high kilometrage vehicles – trucks, buses, taxis, agricultural, military and private vehicles
  • Kerosene, Jet Fuel: (“petroleum”) airline transportation. Previously used also for heating by petroleum ovens
  • Diesel Oil for Heating Purposes: electricity generation during peak demand seasons, for light industries and domestic heating
  • Heavy and Light Fuel Oil: electricity generation (diminished usage due to the transition to natural gas), marine industries and transportation.
לחץ לגרסת הדפסהPrint
Save \ Share