Iceland fuel prices 2026: Did car rental get cheaper?

Magnús Jóhann Björnsson
02 Jan. 2026

If you’ve been budgeting for a self-drive trip in Iceland, fuel has probably been one of the biggest question marks. That changed on January 1, 2026 when fuel prices dropped due to a change in Iceland’s road taxes. Here’s what is happening and how it will affect car rentals in Iceland.

Iceland switched how it collects road-related taxes:

• Fuel taxes on petrol and diesel were removed
• A new road tax was introduced to help fund road maintenance

The practical result for travelers renting a car in Iceland is simple:

• Fuel prices at the pump dropped overnight
• The new road tax is now a separate cost tied to driving
• With Blue Car Rental, that road tax is handled as a fixed daily fee, so you know the cost upfront

This guide explains in 10 easy steps what changed, what the price drop looks like in real numbers, and how this affects your total trip cost when you rent a car in Iceland.

1) What changed on January 1, 2026?

Before 2026, a big part of Iceland’s road-related costs were baked into fuel prices. That meant you “paid as you drove,” but it also meant fuel prices were higher.

Starting January 1, 2026, Iceland removed tax from petrol and diesel and introduced a new road tax system. The idea is to fund road infrastructure more directly, while keeping fuel prices lower.

For tourists and short-term visitors, the most important part is not the politics behind the change. It’s the day-to-day effect:

• Fuel is cheaper at the pump.
• Road cost is clearer and easier to separate in your budget.

And that’s a big deal, because budgeting is half the stress for first-time self-drive travelers.

2) Fuel prices fell by around 90 ISK per liter overnight

The biggest headline is the pump price drop.

On January 1, travelers saw fuel prices fall by about 90 ISK per liter.

Example price change (what many drivers noticed)

• Gasoline (petrol): from around 279 ISK/L → 183 ISK/L
• Diesel: from around 292 ISK/L → 205 ISK/L

That’s roughly a 30% decrease.

Prices still vary by station and region, but the direction is the same: fuel costs are lower across the country.

3) What the lower fuel prices mean for travelers

Lower fuel prices matter most when you’re doing what most visitors come for: covering distance.

A few common examples:

• Golden Circle day trip: easy win, fewer worries about “is this detour worth it?”
• South Coast multi-day drive: more stops, more scenic routes, more kilometers
• Ring Road trip: a lot of driving, and fuel becomes a real budget line

Even if you’re not tracking every króna, fuel adds up fast in Iceland because most itineraries involve long, open-road driving.

So if fuel drops around 30%, that’s a meaningful change for anyone renting a car.

4) The new road tax: the part people worry about

Whenever a new fee is introduced, travelers assume it’s going to be confusing. And sometimes that’s true. 

The road tax is different from fuel cost because:

• it’s not something you “choose” by shopping for cheaper stations
• it can feel vague if it’s based on distance or usage
• it might show up later if it isn’t clearly explained at booking

This is where rental company setup matters.

If the road tax is handled in a way that’s unclear, you can end up with that classic rental-car problem: “I thought I paid everything already.”

If you want to avoid that kind of trip-ending annoyance, read this guide:

• Iceland Road Tax 2026: What Blue Car Rental Customers Should Know

5) Blue Car Rental’s approach: fixed daily road tax (no surprises)

Blue Car Rental charges the road tax as a fixed daily amount:

• 1,550 ISK per day

That’s the whole point: keep it predictable.

Why a fixed daily fee helps travelers

• You know the cost upfront.
• You don’t need to track your odometer.
• You won’t get a surprise bill if you drive farther than planned.
• It’s easier to compare total prices across rental options.

In other words, you can plan your trip around what you want to do, not around avoiding “extra kilometers.”

6) A simple example: what you might save on a typical road trip

Let’s keep this realistic.

Say you’re renting a car for 7 days, doing a classic first-time route like:

• Reykjavík
• Golden Circle
• South Coast (up to Jökulsárlón)
• maybe a bonus loop through Snæfellsnes peninsula

That kind of trip often lands around 1,000–1,400 km depending on detours.

Now assume a normal fuel economy for a mid-size car (just for planning): 7 liters per 100 km.

Fuel usage estimate

If you drive 1,200 km:

• 1,200 km × 7 L / 100 km = 84 liters

Cost at the newer “lower” petrol price

• 84 L × 183 ISK ≈ 15,372 ISK

Cost at an older “high-200s/low-300s” price

If petrol was closer to 279–300 ISK/L:

• 84 L × 279 ISK ≈ 23,436 ISK
• 84 L × 300 ISK ≈ 25,200 ISK

That’s a difference of roughly 8,000–10,000 ISK on this one trip.

Add Blue’s fixed road tax

• 1,550 ISK/day × 7 days = 10,850 ISK

Depending on your exact route and fuel stops, the fuel savings may cover a big portion of the road tax. The main benefit is that both parts are now easier to understand:

• cheaper fuel at the pump
• predictable road tax when renting with Blue

Fuel + road tax example (1,200 km trip)

Assumptions: 1,200 km driven, 7 L/100 km average consumption, 7-day rental.

7) Why this change matters more for longer trips

Short trips benefit, but longer trips feel it more.

If you’re doing 10–14 days on the Ring Road, the Westfjords, or a full “see everything” loop, you’re buying a lot more fuel.

That’s where a 30% drop becomes noticeable.

And longer itineraries also tend to include:

• unplanned detours
• weather-driven reroutes
• extra stops because the light is good (and you don’t want to leave)

That’s normal in Iceland.

So it helps when you’re not stressed about fuel cost or a distance-based surprise fee.

If you’re still deciding how long to stay, this post helps you match trip length to what you want to see:

• How Many Days in Iceland Is Enough? Plan the Perfect Trip Length
  
  

8) Fuel tips that still matter (even when prices are lower)

Lower fuel prices are great, but it doesn’t change the basics.

Watch the pump labels

In Iceland:

• Green pumps are gasoline (petrol)
• Black pumps are diesel

Mixing them up is one of the most expensive travel mistakes you can make.

Payment tips

• Many stations are self-service.
• A card with a PIN is helpful.
• Some stations place a temporary hold on your card until the transaction settles.

Don’t push your range

In more remote areas, stations can be spaced out. It’s smart to refuel when you’re around half a tank if you’re heading away from towns.

For a practical step-by-step guide, link this in your planning phase:

• Refuel With Confidence: Tips for Icelandic Rental Cars
  
  

9) How this affects your full Iceland trip budget

Most travelers budget for Iceland in categories like:

• flights
• accommodation
• food
• activities
• transport

Transport usually includes:

• rental cost
• insurance
• fuel
• parking
• “surprises” (the ones you only learn about after you arrive)

Lower fuel prices reduce one of the most variable categories. And a fixed road tax makes the new system easier to plan.

If you want a full, realistic budget breakdown, this post is a solid reference:

• How Much Does a Trip to Iceland Cost? A Full Budget Breakdown
  
  
• Hidden Costs of Renting a Car in Iceland (and how to avoid them with Blue Car Rental)
  
  

10) Why transparency matters more than ever in 2026

Any time rules change, confusion creates opportunity for unclear pricing.

Some travelers will book based on the lowest-looking headline rate, only to find extra charges later.

That’s why it helps to rent with a company that spells things out clearly, including new fees like the road tax.

If you want the bigger picture of how Blue focuses on clear pricing and practical service, this post fits well as an internal link:

• Why Blue Car Rental Offers the Best Value for Travelers in Iceland

Conclusion

Gas prices in Iceland changed fast on January 1, 2026. With the petrol and diesel tax removed, the price at the pump dropped overnight by roughly 90 ISK per liter. In real terms, many drivers went from seeing petrol around 279 ISK/L to about 183 ISK/L, and diesel from roughly 292 ISK/L to about 205 ISK/L.

At the same time, Iceland introduced a new road tax. With Blue Car Rental, that part stays simple because it’s charged as a fixed 1,550 ISK per day. You see it upfront, you don’t have to track kilometers, and you don’t get a surprise bill just because you decided to drive a little farther.

Put together, this makes self-drive trips in Iceland easier to budget for. Gas (and diesel) is cheaper, and the road cost is clear from day one.

Quick recap

Starting January 1, 2026, Iceland removed the tax on petrol and diesel, and gas prices dropped by about 90 ISK per liter. Petrol fell from around 279 ISK/L to roughly 183 ISK/L, and diesel from about 292 ISK/L to around 205 ISK/L. A new road tax replaced part of that old system, and with Blue Car Rental it’s charged as a fixed 1,550 ISK per day, so your driving costs are easier to plan and easier to predict.

For more information about fuel prices in Iceland here you can see a list of gas stations and price trends over time. 

For travelers renting a car in Iceland, this means:

• fuel is less expensive than before
• trip planning is simpler
• the cost of driving is easier to predict