Israel's gasoline price faces NIS 9 mark as tax cut ends

The price of 95-octane gasoline in Israel may exceed nine shekels per liter following the November 3 expiration of a temporary tax cut. The current price stands at NIS 7.77, but the end of the relief measure, combined with rising global oil costs, threatens to push the cost above that threshold.

Finance Minister Bezalel Smotrich implemented the excise tax reduction last month to stabilize fuel prices before the upcoming elections. An earlier order had lowered the tax by half a shekel per liter. As oil prices increased, Smotrich doubled the reduction to one shekel per liter. The Finance Ministry's Budget Department estimates that these reductions over the past two months will cost the state approximately NIS 467 million in lost revenue.

Taxes typically account for more than 60% of the gasoline price in Israel, generating roughly NIS 20 billion in annual state revenue. The loss of this revenue occurs while the ongoing war has driven defense spending to record levels. After the elections, Smotrich must determine whether to extend the relief or allow prices to rise, leaving the next government to manage the economic impact if the current one does not remain in office.

Global oil prices have climbed by about 10% compared to late September, when the Energy Ministry's Fuel Administration set the October gasoline price. This increase is attributed to expectations of a third round of fighting involving Israel, Iran, and the United States. Even if the tax cut remains in place, gasoline prices are expected to rise by around 30 agorot per liter, reaching just over NIS 8.

If the reduction lapses on November 3, the price could climb above NIS 9. The final price will be determined 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 rate may remain in effect for only a few days.

The decision on the tax cut's future will come after the elections. Smotrich has the authority to extend the relief, but he may choose to let it expire if the current government is set to leave office. This move would shift the burden of higher fuel costs to the incoming administration.