Gasoline prices may hit 9 shekels after tax cut ends

The price of 95-octane gasoline in Israel is currently NIS 7.77 per liter, but it could rise above NIS 9 within days.

Finance Minister Bezalel Smotrich implemented a temporary excise tax reduction last month to stabilize fuel costs ahead of the upcoming elections. This relief measure is scheduled to expire on November 3. The end of this tax break will coincide with rising global oil prices, creating pressure on domestic fuel costs.

Smotrich initially reduced the tax by half a shekel per liter through an order signed one month prior to the larger cut. He subsequently doubled that reduction to NIS 1 per liter as oil prices climbed. Under standard conditions, taxes account for more than 60% of the total cost of gasoline in Israel. These taxes generate approximately NIS 20 billion in annual state revenue.

The Finance Ministry's Budget Department estimates that the tax reductions over the past two months will cost the state approximately NIS 467 million. This expenditure occurs while defense spending reaches record levels due to the ongoing war. Smotrich must determine whether to extend the relief after the elections. If the current government is likely to lose power, he may allow prices to surge, transferring the economic burden to the incoming administration.

The first price adjustment is expected as early as Saturday night. Anticipation of a third round of conflict involving Israel, Iran, and the United States has pushed oil prices up by roughly 10% compared to late September. This increase occurred after the Energy Ministry's Fuel Administration set the gasoline price for October. Even if the tax cut remains in effect, gasoline is projected to increase by about 30 agorot per liter, reaching just over NIS 8. If the reduction lapses, the price may exceed NIS 9.

The final price will be determined near the end of the week based on oil prices in the Mediterranean basin. The new price may remain in effect for only a few days.