Energy Crisis Looms as Refinery Attack near Haifa Shuts Down 60% of Israel’s Fuel Production

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by Ifi Reporter - Dan Bielski Category:Government Jun 17, 2025

Israel’s energy infrastructure is facing mounting pressure following a deadly attack on the Bazan refinery complex in Haifa, which killed three employees, damaged a power station, and forced a complete shutdown of the country’s largest fuel producer. Bazan is responsible for 60% of Israel’s diesel and about half of its gasoline output.

The smaller Ashdod refinery, which refines roughly 35–40% of the nation's fuels, is also offline due to scheduled maintenance—leaving Israel temporarily without domestic refining capacity.

The rating agency S&P Maalot placed Bazan on a watch list with negative implications, citing “uncertainty regarding the extent of the damage, the duration of the shutdown, and the financial consequences.”


Fuel Supplies Tight but No Shortage—Yet

Despite the twin refinery shutdowns, the Ministry of Energy and Infrastructure stated on Sunday night that no immediate fuel shortage is expected. “Israel has adequate reserves and functional continuity plans,” the ministry assured, though it did not reveal specific backup sources for security reasons.

Fuel companies have responded unevenly. Sonol, which relies solely on Bazan, warned business clients it may have to “reduce or halt” fuel deliveries, though all of its gas stations remain operational. Paz, which sources primarily from Ashdod, is relying on reserves built up ahead of maintenance and appears more stable.

Sources in the energy sector note that current concerns are operational, not national. Some companies may face supply gaps unless reserves are pooled or emergency stocks are released.


Electricity Grid Strained but Holding

More than 70% of Israel’s electricity is typically generated using natural gas, but security disruptions have forced rapid changes in the fuel mix. After the Iranian attack, gas production from the Leviathan and Karish offshore rigs was halted by order of the Energy Ministry, concentrating supply on the Tamar reservoir—the main domestic supplier.

Emergency protocols were activated, including stopping gas exports and granting the Energy Minister discretion over gas allocation within the local market.

While Tamar alone can supply about 75% of domestic gas demand, the switch has pushed power plants to burn more diesel and coal, raising costs and emissions. Coal-fired electricity generation has jumped from 15% to significantly higher levels. Israel’s emergency coal and diesel reserves, bolstered in recent years, are now proving critical.


Economic Toll Mounting: Over NIS 300 Million a Week

According to Chen Herzog, chief economist at BDO, the shutdown of Leviathan and Karish is costing the Israeli economy over NIS 300 million per week, driven by lost exports and reduced state royalties. Higher costs for electricity production from backup fuels further compound the losses.


Energy Transition Softens the Blow

One silver lining is the growing role of renewable energy. Approximately 14% of Israel’s electricity is now generated from solar power, and the current summer season provides optimal conditions for solar output. This has helped mitigate demand on fossil fuel plants during peak daylight hours.


Strategic Fuel Reserves in Play

The Energy Ministry emphasized that strategic diesel reserves are substantial but undisclosed for security reasons. Power plants are required to hold diesel stocks sufficient for at least 100 hours of operation, and those reserves were reportedly full prior to the attack.

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