If you're planning a self-drive trip to Iceland, fuel is one of the few costs that's hard to pin down in advance. Iceland changed how it taxes driving at the start of 2026, and pump prices have moved several times since.
Short answer: On 1 January 2026 Iceland removed most of the tax built into petrol and diesel and replaced it with a kilometre-based road tax, under Law no. 100/2025 (Government of Iceland announcement). Pump prices fell by roughly 95 ISK per litre overnight (RÚV, 1 January 2026), with petrol dropping from about 310 to about 213 ISK/L. Since then, higher world oil prices and the end of a temporary VAT cut have pushed prices back up. In early October 2026 petrol costs about 253 to 287 ISK/L, typically about 282, and diesel about 303 to 333 ISK/L, typically about 327 (Gasvaktin price tracker, last checked 12 October 2026). So petrol is still somewhat cheaper than at the end of 2025, diesel now costs slightly more than it did, and renters now also pay the road tax, which Blue charges as a fixed daily amount (see the road tax guide).
What are Iceland's fuel prices right now?
Prices for petrol (gas, if you're visiting from North America) and diesel differ by company and by station. The table shows the range across Iceland's stations and how it compares with the months around the change.
| Period | Petrol (95), typical | Diesel, typical |
|---|---|---|
| End of December 2025, before the change | ~310 ISK/L | ~315 ISK/L |
| January 2026, after the change | ~213 ISK/L | ~228 ISK/L |
| Summer 2026 (temporary VAT cut) | ~225 to 230 ISK/L | ~245 to 265 ISK/L |
| Early October 2026 (station range) | ~253 to 287 ISK/L | ~303 to 333 ISK/L |
Figures are rounded medians for the main fuel companies and the October station range, from the Gasvaktin price tracker, last checked 12 October 2026. The members-only warehouse-store station can be cheaper, and remote stations can cost more than those in Reykjavík. If you're converting to EUR, USD or GBP, use a current exchange rate, since currencies move independently of fuel prices.
Why did fuel prices drop in January, and why have they risen since?
Until 2025, much of Iceland's road funding came from taxes built into the price of petrol and diesel, so drivers paid it every time they filled up. From 1 January 2026 those fuel taxes were removed, the carbon tax was raised, and a kilometre-based road tax was introduced for all cars, including rentals, under the kilometre-fee law passed by Alþingi (Law no. 100/2025; see Ísland.is and the FÍB summary of the change). Pump prices dropped by about 30% overnight.
Three things have moved prices since:
- World oil prices rose through March and April 2026, adding roughly 40 ISK per litre by the end of April.
- A temporary VAT cut lowered VAT on fuel from 24% to 11% from May to 31 August 2026, taking roughly 25 to 30 ISK off a litre over the summer (Vísir, 1 September 2026).
- The full VAT rate returned on 1 September 2026, and oil prices rose again in September, which is why prices are now at their highest since the change.
For a visitor, the practical point is to treat fuel and road tax as two separate line items: what you pay at the pump, and the road tax your rental company applies.
Petrol or diesel: which does your rental car use?
Most small and mid-size rental cars in Iceland run on petrol, while some larger 4x4s and vans use diesel. Check your specific vehicle before refuelling rather than assuming. Iceland uses a simple colour code at the pump: green nozzles are petrol, black nozzles are diesel. Putting the wrong fuel in a rental car is one of the more expensive mistakes a visitor can make, since it usually means towing and repair costs well beyond the fuel itself. Diesel is currently the more expensive of the two per litre.
A few other practical points at Icelandic filling stations:
- Many are self-service, so a card with a PIN makes paying much easier.
- Some fuel-station card readers place a temporary hold on the card that clears when the transaction settles. That's standard card-network behaviour and has nothing to do with your rental: Blue Car Rental takes a credit card imprint as security and doesn't hold or block funds on your card.
- In rural areas, especially the Westfjords, the Highland approach roads or stretches of the East, stations can be far apart. Refuel once you're around half a tank rather than waiting for the warning light.
What is Iceland's road tax, and how does it affect your rental car cost?
The road tax funds road maintenance now that it's no longer collected through fuel. The national tax is set per kilometre driven (FÍB summary of the change), which is hard to estimate before a trip, so what you pay depends on how your rental company passes it on. Blue Car Rental charges a fixed 1,550 ISK per rental day, including an administration fee, collected in advance (road tolls and road tax, last checked September 2026).
With Blue Car Rental, the road tax is charged as a fixed 1,550 ISK per rental day, collected at booking as its own line (last checked September 2026). Our Iceland road tax guide covers it in detail. That means:
- You see the cost when you book, not after the trip.
- There's no need to track your odometer to estimate what you'll owe.
- An extra day trip or a longer detour doesn't change the daily amount.
For a broader look at how rental costs are structured, see prices in Iceland car hire and hidden costs of renting a car in Iceland.
How much fuel will a typical Iceland road trip actually cost?
For a common first-time itinerary, Reykjavík, the Golden Circle, the South Coast up to Jökulsárlón and perhaps a loop through Snæfellsnes, total driving often lands around 1,000 to 1,400 km over a week. Using 7 litres per 100 km as a planning figure for a mid-size petrol car (real consumption on Iceland's gravel and wind is often higher):
| Calculation | Formula | Result |
|---|---|---|
| Fuel used over 1,200 km | 1,200 km × 7 L/100 km | 84 L |
| Petrol at ~282 ISK/L (October 2026) | 84 L × 282 ISK | ~23,700 ISK |
| Petrol at ~213 ISK/L (January 2026) | 84 L × 213 ISK | ~17,900 ISK |
| Petrol at ~310 ISK/L (December 2025) | 84 L × 310 ISK | ~26,000 ISK |
| Road tax with Blue over 7 days | 1,550 ISK × 7 | 10,850 ISK |
These numbers are illustrative. Fuel use depends on the vehicle, driving style, weather and route, and pump prices vary by station. At October 2026 prices, the fuel for this trip costs about 2,400 ISK less than it would have at the end of 2025, while the road tax adds 10,850 ISK. So for a typical week the combined cost of fuel and road tax is higher than fuel alone was before the change, though it's now easier to split into a fixed part and a variable part before you travel.
Longer trips use more fuel, so a 10 to 14 day Ring Road loop or a Westfjords extension is more sensitive to the pump price. That's also where a fuel-efficient car makes the biggest difference.
Does fuel cost the same everywhere in Iceland?
No. Prices vary by region and by company, and can be higher in remote areas. In early October 2026, for example, petrol cost about 253 ISK per litre at around 40 lower-priced stations in the capital area, Selfoss, Borgarnes and Akureyri, about 272 to 287 ISK around Keflavík Airport, and about 282 to 287 ISK at most other stations (Gasvaktin, 12 October 2026). Reykjavík and the larger towns along Route 1 have more competing stations, while the Westfjords, the Highland access roads and the northeast have fewer options. That's one more reason not to let the tank run low before the next town, particularly outside the summer season.
Discounts narrow the gap. Most fuel chains take 10 to 12 ISK off per litre for customers with the chain's own discount key ring or card, although the discount doesn't apply at their lowest-price stations. Every Blue Car Rental key also comes with a discount chip that gives 7 ISK off every litre of fuel at Olís and ÓB stations in Iceland, and 10% off food and drinks at Olís stations and their restaurants.
Your choice of vehicle affects real-world fuel cost more than the headline pump price does. A smaller 2WD car will usually use noticeably less fuel over a long trip than a larger 4x4, so match the vehicle to your actual route rather than defaulting to the biggest option. The guide on 4x4 vs 2WD in Iceland explains when the extra fuel use of a larger vehicle is worth it.
Mistakes to avoid when budgeting for fuel in Iceland
- Assuming the rental price includes fuel. It doesn't. Fuel and the road tax are separate from the daily rental rate.
- Using an old price reference. Prices fell sharply in January 2026 and have risen several times since, so figures from early 2026 are now too low.
How this fits into your overall Iceland trip budget
Transport is usually one line among several in an Iceland trip budget, alongside flights, accommodation, food and activities, but it's often the hardest to estimate because it depends on route and driving days. A fixed daily road tax makes part of it predictable; fuel is the part that still moves with the pump price.
If you rent with Blue Car Rental more than once, the Blue+ loyalty programme: Bronze 5%, Silver (250+ points) 10%, Gold (400+ points) 15% lowers the cost of future rentals. For general ways to trim costs across a trip, see how to keep your Iceland car rental costs down.
Conclusion
Fuel in Iceland got cheaper in 2026, but only briefly: pump prices fell by about 30% on 1 January. Since then oil prices and the return of full VAT have taken back most of that drop for petrol and all of it for diesel, which now costs slightly more than before the change, and the road tax is now charged on top. What has improved is predictability: Blue charges the road tax as a fixed daily amount shown at booking, so the only part of your transport cost that still moves is the fuel you buy along the way.
PARKING IN REYKJAVÍK: ZONES, PAYMENT, AND WHERE TO LEAVE YOUR CAR
