Minister denies Israel faces fuel shortage

A missile hit to its power plant has put Bazan's Haifa oil refinery out of action, but energy minister Eli Cohen says "The energy industry can provide everything required."

On Sunday night, in the barrage of Iranian missiles aimed at Haifa, a missile hit the power plant adjacent to the Bazan oil refinery. The explosion set off a fire that killed three of the company’s employees, who had taken shelter in a protected inner room, and led to the refinery being shut down, the company reported to the Tel Aviv Stock Exchange. This followed a previous hit to a pipeline in the installation on Saturday night. Now, the largest refinery in Israel cannot supply fuels, just when two offshore gas production platforms have been shut down and some power stations in Israel have switched to using diesel.

Against this background, the Ministry of Energy and Infrastructure stated: "The energy industry is capable of answering all the economy’s fuel needs."

The missile hit the Bazan installation’s power plant, and in its notification to the stock exchange Bazan said that it was working with the Israel Electricity Corporation (IEC) "to carry out as soon as possible the actions required for the regular supply of electricity to the site."

Even before the official notification to the stock exchange, Minister of Energy and Infrastructure Eli Cohen and IEC CEO Meir Spiegler visited the site. "We have a strong energy industry that will be able to provide everything required by the citizens of Israel, both fuels and electricity," Cohen said, apparently implying that Bazan’s oil refining activity was completely shut down.

Bazan is one of two refineries in Israel that produce gasoline, diesel fuel, and cooking gas from oil. Israel’s oil consumption is entirely from imports, mainly from Azerbaijan. Bazan is the larger of the two refineries, the smaller one being located in Ashdod.

The Leviathan and Karish gas production platforms are currently shut down, which has led some of Israel’s power stations to burn diesel fuel rather than gas in order to keep up regular production. This is why all power plants in Israel are required to be dual-fuel. The result is that demand for diesel fuel is now larger than ever.

Will there be a fuel shortage?

According to the Ministry of Energy and Infrastructure, no fuel shortage is expected in Israel. For security reasons, the ministry refuses to specify how fuels will be supplied. Israel has emergency reserves of fuel precisely for this kind of situation, and the Ashdod oil refinery is still working. If necessary, Israel can also import fuels. There is thus no fuel shortage expected at the moment until production at the Bazan refinery is restored.

What about the planned removal of Bazan from the Haifa Bay?

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Because of the environmental and security risk that Bazan represents in the heart of Israel’s third largest metropolis, it was decided in 2022 that Bazan’s installations in Haifa Bay would be removed, a process that was meant to be completed by 2029. There has already been an initial postponement until 2030, but National Economic Council chairperson Avi Simhon, who is overseeing the project, insists that it will end on time.

Removal requires reconfiguration of the entire fuels industry, which will switch to being based on imports of finished fuel products instead of crude oil, necessitating the construction of new infrastructure. The project will free up a considerable area of land in Haifa, which will be used for housing and commerce.

Ministry of Energy and Infrastructure director general Yossi Dayan argued in February that the Swords of Iron war had demonstrated that oil refining in Israel held certain advantages and meant independence in the production of fuels from imported oil, but Simhon told "Globes" in March that on the security level "Bazan is a large and vulnerable installation, and therefore precisely because of the threats it’s better to replace it with storage facilities that are dispersed and protected." The hit to the oil refinery would seem to have strengthened Simhon’s position, which could help to remove obstacles to evacuating the refinery within the next few years.

A report from TASC Consulting for the Fuel and Gas Administration in the Ministry of Energy and Infrastructure, released just before the missile strike, recommends that Israel’s industrial consumers of fuel should organize to buy fuels at cheaper prices from fuel traders. The report also predicts that evacuation of the refinery will lead to a fairly small increase in the price of fuel, of about NIS 0.05 per liter.

Published by Globes, Israel business news - en.globes.co.il - on June 17, 2025.

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