Fuel Tax Relief: Israeli Pump Prices Could Pass 9 Shekels

Israeli drivers could see the cost of 95-octane gasoline rise above 9 shekels per liter, up from 7.77 shekels today, after a temporary tax cut lapses on November 3. Finance Minister Bezalel Smotrich introduced the reduction in the state's excise tax on gasoline last month to hold down prices ahead of the vote.

Taxes account for more than 60% of what a liter of gasoline costs in Israel and generate roughly 20 billion shekels in state revenue annually. The Budget Department at the Finance Ministry estimates that the reductions of the past two months will cost the state about 467 million shekels. That expense arrives as the ongoing war has pushed defense spending to record levels.

The cut was tightened in stages. An order signed a month before the current measure lowered the tax by half a shekel per liter. As oil prices climbed, the reduction was doubled to 1 shekel.

Prices will rise even if the relief stays in place. Expectations of a third round of fighting involving Israel, Iran and the US have lifted oil prices by about 10% compared with late September, when the Energy Ministry's Fuel Administration set the October gasoline price. Under that scenario, gasoline would rise by around 30 agorot per liter, reaching just over 8 shekels. If the reduction lapses, the price could climb above 9 shekels.

After the elections, Smotrich must decide whether to extend the relief. If it becomes clear the current government will not stay in office, he could allow prices to surge and leave the next government to handle the economic consequences.

The final price will be set toward the end of the week, based on oil prices in the Mediterranean basin at that time. The first price increase is expected as early as Saturday night, and the new price may remain in effect for only a few days.