Gasoline Faces Nine Shekel Surge

The cost of 95-octane gasoline in Israel is currently NIS 7.77 per liter, but drivers may soon pay more than NIS 9.

A temporary reduction in the state excise tax on fuel is set to expire on November 3. This deadline falls immediately after upcoming elections. The expiration could coincide with rising global oil prices to drive the price of gasoline above the nine-shekel threshold.

Finance Minister Bezalel Smotrich introduced the initial tax cut last month to prevent fuel prices from spiking before the vote. An earlier order, signed a month prior, had already lowered the tax by half a shekel per liter. As oil prices climbed, Smotrich doubled the reduction to NIS 1 per liter.

Under standard conditions, taxes account for more than 60% of the final gasoline price in Israel. These taxes generate approximately NIS 20 billion in state revenue annually. The Finance Ministry's Budget Department estimates that the reductions over the past two months will cost the state about NIS 467 million. This expenditure occurs while defense spending has reached record levels due to the ongoing war.

Smotrich must decide whether to extend the relief after the elections. If the current government is unlikely to remain in power, he could allow prices to surge, leaving the economic burden to the incoming administration.

The first price adjustment 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 to late September. That was when the Energy Ministry's Fuel Administration set the current October price.

Even if the tax cut remains in place, gasoline is expected to rise by around 30 agorot per liter, moving the price 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. The new price may remain in effect for only a few days.