Israel fuel prices could top NIS 9 per liter as tax cut expires after elections

Rising global oil prices amid expectations of renewed fighting with Iran, coupled with the expiration of Smotrich's fuel tax cut on November 3, are expected to drive fuel prices sharply higher.

Fuel prices in Israel are expected to rise sharply immediately after the elections, as a temporary NIS 1 per liter fuel tax reduction introduced by Finance Minister Bezalel Smotrich is set to expire on November 3.

Combined with rising global oil prices amid expectations of renewed fighting involving Israel, the US and Iran, the expiration of the tax cut could push the price of 95-octane gasoline above NIS 9 per liter, up from its current price of NIS 7.77.

Smotrich introduced the temporary reduction in the state's excise tax on gasoline last month to prevent fuel prices from soaring ahead of the elections.

The original order, signed a month earlier, reduced the tax by half a shekel per liter. However, rising oil prices prompted Smotrich to double the reduction.

Under normal circumstances, taxes account for more than 60% of the price of gasoline in Israel, generating approximately NIS 20 billion in annual state revenue.

According to the Finance Ministry's Budget Department, the tax cuts introduced over the past two months are expected to reduce state revenue by approximately NIS 467 million, at a time when the ongoing war has driven defense spending to record levels.

Election outcome could determine fate of fuel tax relief as fuel prices could top NIS 8

Following the elections, Smotrich will have to decide whether to extend the tax reduction. However, if it becomes clear the current government will not remain in office, he could let fuel prices surge, leaving the next government to deal with the economic consequences.

Regardless of whether the tax cut is extended, the first fuel price increase is expected as early as Saturday night.

Expectations of a third round of fighting involving Israel, Iran and the US have already pushed oil prices up by approximately 10% compared with late September, when the Energy Ministry's Fuel Administration set gasoline prices for October.

As a result, even if the tax reduction remains in effect, gasoline prices are currently expected to rise by approximately 30 agorot per liter, bringing the price to just over NIS 8.

The final price will be determined toward the end of the week, based on oil prices in the Mediterranean basin at that time. However, the new price could remain in effect for only a few days.