Fuel Price Surge Threatens Israel's Private Transportation Sector

Israel's private transportation sector is on the brink of a crisis due to a sharp, multi-decade increase in diesel prices, coupled with the cancellation of excise tax refunds and rigid, non-indexed contracts. In an urgent letter to Finance Minister Bezalel Smotrich, the Chairman of the Transportation Companies Organization, Nissim Sarusi, and CEO Dudi Gil warned that the soaring fuel costs are completely eroding the industry's slim profit margins, jeopardizing the continued operation of student, soldier, and employee transport services nationwide.

The appeal follows the government's decision to reduce excise tax on gasoline only, leaving diesel prices unaddressed. The letter, also sent to Prime Minister Benjamin Netanyahu and Mehran Froznar, Head of the Budget Division at the Ministry of Finance, highlights that diesel prices at the refinery gate rose approximately 59% from an average of 2.05 shekels per liter in 2025 to 3.26 shekels in September 2026, reaching a peak of 3.66 shekels in April 2026. The excise tax on diesel, which is 3.37 shekels per liter, remains unchanged, and the excise tax rebate previously available to buses was completely canceled in January 2026. Consequently, the effective cost of diesel for operators, before VAT, jumped by about 29% from an average of 5.15 shekels per liter in 2025 to 6.63 shekels in September 2026.

According to the organization, fuel constitutes about 40% of operating costs for transportation companies. This surge alone adds approximately 11.5% to total operating expenses, wiping out profits in an industry with low margins. The impact is particularly severe on student transportation tenders, which have fixed nominal prices for three to four years without indexation, forcing companies to absorb significant cost increases and operate routes at a loss.

The organization demands that the Finance Minister immediately reduce the excise tax on diesel to match the benefit given to gasoline, or reinstate the excise tax rebate for buses. They also request that the Ministry of Education be instructed to include an indexation mechanism for diesel prices in all student transportation tenders starting from the 2027-2028 school year, and to approve a one-time adjustment to existing contracts to cover diesel price increases since April 2026.

The Transportation Companies Organization represents over 500 private companies, operating approximately 22,000 vehicles and employing over 25,000 drivers and workers.