Israel Fuel Prices May Hit Record 9 NIS Per Liter Amid Tax Uncertainty
Israel's fuel prices may approach a record 9 NIS per liter in November if Finance Minister Bezalel Smotrich declines to extend the 1 NIS fuel tax reduction amid rising global oil costs.
The price of 95-octane gasoline in Israel could approach an unprecedented peak of 9 NIS per liter as early as the weekend. This surge threatens to materialize if Finance Minister Bezalel Smotrich refrains from extending the 1 NIS fuel tax reduction order, alongside ongoing increases in global oil prices and the strengthening of the US dollar.
At midnight, the price of gasoline was lowered to 7.77 NIS per liter. Previously, fuel prices hit an all-time record of 8.27 NIS per liter following geopolitical tensions in the Strait of Hormuz, which pushed crude oil prices to approximately 110 USD per barrel over the past two months. The initial sharp rise in September prompted the Finance Minister to cut the fuel tax by 0.50 NIS after prices peaked at 8.25 NIS, echoing a similar measure taken in September 2012 by Prime Minister Benjamin Netanyahu.
In October, Finance Minister Bezalel Smotrich ordered an increase in the tax discount from 0.50 NIS to 1 NIS per liter, a temporary relief measure set to expire on Saturday night. The total cost of this tax subsidy has already approached 500 million NIS, drawing opposition from senior professionals within the Ministry of Finance. Extending the 1 NIS discount through November would add another 300 million NIS, bringing the total fiscal cost to approximately 800 million NIS without an allocated budgetary source.
Calculations indicate that canceling the tax benefit alone would immediately drive fuel prices up by 1 NIS per liter, surging from the current 7.77 NIS to 8.77 NIS. This potential jump could be compounded by an additional 10 to 20 agorot due to rising international market prices and the strengthening of the US dollar against the shekel, with the representative exchange rate standing at 3.11 NIS.
Dr. Amit Mor, CEO of Eco Energy, warned that the final price could edge closer to 9 NIS per liter if the tax is not extended, especially if global market prices climb further during the measurement days. Economists warn that such a sharp fuel price hike could accelerate Israel's inflation rate by approximately 0.5% as early as November, triggering widespread price increases across numerous goods and services.
Ministry of Finance officials stated over the weekend that Finance Minister Bezalel Smotrich has not yet decided whether to extend the tax reduction order. According to officials, the minister will finalize his policy only closer to the official setting of next month's fuel prices, depending on developments in the oil and foreign exchange markets.
