Gasoline Prices May Cross Nine Shekels as Fuel Tax Break Ends

The cost of 95-octane gasoline in Israel may rise above NIS 9 per liter within days. The temporary fuel tax reduction currently in place is scheduled to expire on November 3. If the cut lapses, the price could jump sharply from its current level of NIS 7.77.

Finance Minister Bezalel Smotrich implemented the tax cut last month to prevent prices from spiking before the upcoming vote. An earlier order had lowered the excise tax by NIS 0.50 per liter. As global oil prices increased, the finance minister doubled that reduction to NIS 1.00 per liter.

Taxes typically account for more than 60% of the retail price of gasoline in the country. This levy generates approximately NIS 20 billion in annual revenue for the state. According to the Budget Department of the Finance Ministry, the reductions enacted over the past two months will cost the government roughly NIS 467 million. This spending occurs while defense expenditures have reached record highs due to the ongoing war.

Oil prices have climbed by about 10% since late September. That timeframe marks when the Energy Ministry's Fuel Administration set the gasoline price for October. The increase coincides with expectations of a third round of conflict involving Israel, Iran, and the United States.

The next price adjustment is expected as early as Saturday night. If the tax cut remains in effect, gasoline is projected to increase by approximately 30 agorot per liter, reaching just over NIS 8. If the reduction expires, the price could surpass the NIS 9 mark.

Smotrich must decide whether to extend the relief after the elections. If it becomes clear that the current government will not remain in office, he may allow prices to surge, leaving the economic impact to the next administration. The final price will be determined based on Mediterranean oil prices toward the end of this week. The new rate may remain in effect for only a few days.