Gas, diesel, or hybrid: the fuel type you rent in Iceland changes what you pay to drive the Ring Road. The right pick depends on your car size, your route, and the new 2026 road tax. Read on to see which costs less.
Gas versus diesel versus hybrid is one of the first cost questions when you book a car in Iceland, and the answer shifted in 2026. A new road tax now applies to every vehicle, and fuel prices fell when the old fuel tax was removed. Before you choose, it helps to compare the full range of car rental in Iceland.
This guide breaks down each fuel type by pump price, efficiency, rental cost, and total spend on a full loop of the country. It also explains how the new per-kilometer tax changes the math. For road rules, conditions, and fuel stops, driving in Iceland covers the rest.
The honest answer is that no single fuel type wins for everyone, since a small gas car and a large diesel camper are different trips. Keep reading for an at-a-glance table, a deep dive on each option, and a clear verdict for the Ring Road.
What to Know About Fuel Costs on the Iceland Ring Road
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Gasoline is cheaper per liter than diesel in Iceland, but diesel engines usually burn less fuel over long distances.
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For a small car on a budget, a gas model is often the cheapest overall once the lower rental rate is counted.
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For larger vehicles and long daily drives, diesel efficiency tends to win, which is why most campers and 4x4s are diesel.
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A hybrid has the lowest running cost but the highest daily rental rate, so the savings show up mainly on long trips.
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From January 2026, a kilometer-based road tax applies to every vehicle, which narrows the gap between fuel types.
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Expect to spend roughly 250 to 400 USD on fuel to drive the full Ring Road, depending on the vehicle and season.
| Gas (Petrol) | Diesel | Hybrid | |
| Pump or Energy Price | About 2.00 USD per liter | About 2.30 USD per liter | Charging from 0.20 to 0.50 USD per kWh |
| Efficiency | Good in small cars | Best over long distances | Lowest running cost |
| Rental Cost | Lowest, especially small cars | Mid to high, common in big vehicles | Highest daily rate |
| Best Vehicle | Small 2WD cars | Campers, 4x4s, motorhomes | Mid-size cars and SUVs |
| Best For | Budget short trips | Long Ring Road drives | High-mileage trips, low running cost |
Gas Cars in Iceland: The Cheapest to Rent
Gasoline costs less per liter than diesel in Iceland, at roughly 2.00 USD per liter in 2026. Small gas cars are also the cheapest category to rent, which makes them the budget choice for shorter trips and lighter driving.
The trade-off is efficiency. A gas engine usually burns more fuel per mile than a diesel of the same size, so on a long loop the cheaper pump price is partly offset by higher consumption. For a compact car covering moderate distances, though, gas often wins on total cost.
What a Gas Car Costs on the Ring Road
A small gas car is the lowest-cost way to start, and the savings sit mostly in the rental rate. To compare current rates, look at the range of cheap rental cars, which are mostly economical gas models.
Who Should Choose a Gas Car
A gas car suits budget travelers, couples, and anyone sticking to the Ring Road and Golden Circle without heavy daily mileage. It is the simplest, lowest-rental option when you do not need a large or four-wheel-drive vehicle.
Diesel Cars in Iceland: Cheaper Over Long Distances
Diesel costs more per liter than gasoline in Iceland, at around 2.30 USD per liter in 2026. The advantage is efficiency, since diesel engines typically travel further on a liter, especially at steady highway speeds on the open Ring Road.
That is why most larger vehicles in Iceland are diesel, including SUVs, vans, and motorhomes. Over a long loop with a bigger vehicle, the lower consumption usually more than makes up for the higher pump price.
What a Diesel Car Costs on the Ring Road
For bigger vehicles and long routes, diesel is usually the cheaper engine to run. Most 4x4 rentals and nearly all camper van rental models use diesel for this reason.
Who Should Choose a Diesel Car
Diesel suits travelers driving the full Ring Road, heading into the Highlands, or renting a larger vehicle for a group. If you are covering long daily distances, the better fuel economy is where diesel pays off.
Hybrid Cars in Iceland: Lowest Running Cost
A hybrid has the lowest energy cost of the three, since electricity in Iceland is cheap and the car uses less fuel. Charging runs about 0.20 to 0.50 USD per kilowatt-hour, well below the cost of filling a tank.
The catch is the rental price. Hybrids, and especially plug-in hybrids, rent at a higher daily rate than a comparable gas car, so the running-cost savings need enough miles to add up. They make the most sense on longer, higher-mileage trips.
What a Hybrid Costs on the Ring Road
A hybrid trims your fuel bill but starts from a higher rental rate, so the math favors long routes. Charging points, range, and cold-weather tips for driving an electric or hybrid car in Iceland are worth a look before you book.
Who Should Choose a Hybrid
A hybrid suits travelers who plan a full Ring Road loop, can charge overnight at their accommodation, and want the lowest running cost. It is less worthwhile for a short trip where the higher rental rate outweighs the fuel savings.
How the 2026 Road Tax Changes the Comparison
From January 1, 2026, Iceland replaced fuel taxes with a kilometer-based road tax that applies to every vehicle, regardless of fuel type. For a standard car the base rate is roughly 0.05 USD per kilometer, often billed by rental firms as a flat fee of about 11 USD per day.
This matters most for hybrids and electric cars. Because every vehicle now pays the same per-kilometer charge, the old running-cost advantage of going electric has narrowed. A hybrid is still cheaper to run, just not by as wide a margin as before.
At the same time, removing the fuel tax dropped pump prices by around 0.65 USD per liter, which is a meaningful cut for gas and diesel drivers. The net effect brought the three fuel types closer together on total cost.
Comparing Total Fuel Cost on the Ring Road
The Ring Road is about 810 miles (1,300 kilometers), and a full loop typically uses 250 to 400 USD of fuel depending on the vehicle. A small gas car sits at the low end, a large diesel camper toward the middle, and a thirsty gas SUV at the top.
A hybrid usually lands lowest on energy for the same loop, often saving 30 to 40 percent on fuel against a petrol car. Add the higher rental rate and the equal road tax, though, and the overall gap is modest unless you drive a lot. These figures are approximate and shift with prices and conditions.
Key Considerations When Choosing a Fuel Type
Pump price alone does not decide the cheapest option. Weigh these practical factors before you book.
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Vehicle size: small means gas, large usually means diesel, and mid-size opens up hybrid.
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Distance: the more miles you drive, the more efficiency and hybrid savings matter.
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Rental rate: a hybrid's higher daily price needs enough driving to pay back.
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Charging: a hybrid is best if you can charge overnight at your accommodation.
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Terrain: the Highlands need a 4x4, which is almost always diesel.
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Season: cold weather and heater use raise consumption across every fuel type.
How to Plan the Cheapest Drive Around Iceland
Most trips point clearly to one fuel type once you know your route and vehicle. Matching the two is the simplest way to keep costs down.
If you want the lowest total for a standard Ring Road trip, a small gas car or a hybrid is usually the cheapest, and a flexible self-drive plan keeps you in control of the route. Booking one of the self-drive tours bundles the car and a route if you would rather not plan every day.
If you are renting a larger vehicle, a camper, or heading off the paved roads, diesel is the efficient choice for long distances. For a lower upfront price, compare the budget self-drive tours and fill up at the well-signed gas stations in Iceland along the way.
So Which Fuel Type Costs Less on the Ring Road?
For a small car on a standard loop, gas is usually the cheapest overall thanks to the low rental rate. For a larger vehicle or long daily drives, diesel wins on efficiency. A hybrid costs the least to run and suits high-mileage trips where the fuel savings outweigh the higher rental price.
The cheapest fuel type is the one matched to your vehicle and mileage, not a single winner for every trip. To plan the route itself, map out the Ring Road and pick up a car rental in Reykjavik before you set off.
Which fuel type did you choose for your Iceland road trip, and how did the cost compare to what you expected? Share your experience in the comments below, and ask us anything about keeping your Ring Road fuel costs down.
I was born on the west side of Reykjavík and grew up downtown, so Iceland has been my back yard for most of my life. I'm a father of two, I've traveled on five continents, and I still haven't found a country that holds my attention the way this one does.
That's why I co-founded Guide to Iceland. We connect travelers directly with Icelandic operators, guides and hosts, so the advice and the services both come from people who actually live here.
I write about the practical side of a trip: what eating out in Reykjavík really costs, whether to pick Sky Lagoon or Hvammsvík, where to stop for food along the Ring Road, and which regions give you the best odds of clear skies for the northern lights. If you're planning a trip and something doesn't add up, message me.
