Israel's gas price could hit 9 shekels as tax cut expires

Israeli drivers may see the price of 95-octane gasoline cross the 9-shekel threshold next week. This potential spike stems from the expiration of a temporary tax break on November 3, which arrives just as global oil prices climb. The current pump price stands at 7.77 shekels per liter.

Finance Minister Bezalel Smotrich implemented the tax reduction in September to buffer the economy before the upcoming elections. The initial order, signed a month prior, cut the excise tax by 0.5 shekels per liter. As oil markets rose, Smotrich doubled that reduction to 1 shekel. The Finance Ministry's Budget Department estimates these two-month cuts will cost the state approximately 467 million shekels. This expenditure occurs while defense budgets reach record highs due to the ongoing war.

Under standard conditions, taxes account for more than 60% of the cost of gasoline in Israel, generating roughly 20 billion shekels in annual revenue. Smotrich must now decide whether to extend the relief after the vote. If the current government loses power, he may let prices jump, passing the economic burden to the incoming administration.

Expectations of a third round of conflict involving Israel, Iran, and the United States have driven oil prices up by about 10% since late September. That period marks when the Energy Ministry's Fuel Administration set the current October rate. Even if the tax cut remains active, analysts project a 30-agora increase per liter, pushing the price just over 8 shekels. If the break lapses, the cost could exceed 9 shekels.

The final price will be determined near the end of this week. The Fuel Administration will base the new rate on oil prices in the Mediterranean basin at that time. The updated price may remain in effect for only a few days before the next scheduled adjustment.