Israeli Fuel Prices Could Top NIS 9 After Elections as Tax Cut Expires

Drivers in Israel may face a steep jump at the pump right after the elections. A temporary fuel tax reduction introduced by Finance Minister Bezalel Smotrich is due to expire on November 3, and its end could combine with climbing global oil prices to push the cost of 95-octane gasoline above NIS 9 per liter. The current price is NIS 7.77.

Smotrich introduced the cut in the state's excise tax on gasoline last month, aiming to keep fuel prices from soaring ahead of the vote. An earlier order, signed a month before that, had lowered the tax by half a shekel per liter. As oil prices rose, the finance minister doubled the reduction to NIS 1.

Under normal conditions, taxes make up more than 60% of the price of gasoline in Israel and bring in roughly NIS 20 billion in state revenue each year. According to the Finance Ministry's Budget Department, the reductions of the past two months are expected to cost the state about NIS 467 million. That comes as the ongoing war has pushed defense spending to record levels.

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

Whatever he decides, the first price increase is expected as early as Saturday night. 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 gasoline price for October.

As a result, even if the tax cut stays in place, gasoline is expected to rise by around 30 agorot per liter, taking the price to just over NIS 8. If the reduction lapses, the price could climb above NIS 9.

The final price will be set toward the end of the week, based on oil prices in the Mediterranean basin at that time. The new price may remain in effect for only a few days.