Israel cuts gasoline prices by 50 agorot after Smotrich approves temporary excise relief

Finance Minister Bezalel Smotrich signed an order on Sunday cutting the price of gasoline by 50 agorot per liter beginning at midnight, bringing the self-service price of 95-octane gasoline down from NIS 8.25 to NIS 7.75 per liter, Walla reported on Sunday.

The state will absorb the difference by temporarily relinquishing part of the excise tax it collects from drivers.

The decision came less than a week after gasoline prices jumped last week to a level matching the record set in Israel in September 2012. The sharp increase resulted from higher global gasoline prices and refining margins, the dollar-shekel exchange rate, the linkage of the excise tax to the Consumer Price Index, and an update to the marketing margin and full-service surcharge.

Immediately after the new price was announced, Smotrich instructed Finance Ministry officials to find a way to reduce by 50 agorot the amount drivers pay at gas stations. The chosen solution was a temporary reduction in the excise tax, one of the main components of gasoline prices in Israel. Rather than having drivers bear the full increase, the state will forgo some tax revenue in the coming period.

The timing, however, complicated the decision. Elections are scheduled for October 27, and cutting the price by 50 agorot per liter less than two months before voters go to the polls raised concerns that the measure could amount to election economics.

Smotrich signs order cutting gasoline price by 50 agorot until after elections

The Finance Ministry's legal adviser determined that the price reduction could be implemented during this period, citing, among other things, the precedent set when Avigdor Liberman served as finance minister, and the excise tax was reduced close to an election. Attorney-General Gali Baharav-Miara also approved the move.

The order will remain in effect until October 31, four days after the election. This means drivers will receive the discount beginning Sunday night and will continue to benefit from it throughout the election campaign, while Smotrich will be able to present the public with an immediate and noticeable reduction in one of the more significant expenses faced by households.

Finance Ministry officials say the goal is not only to ease the burden on drivers. Expensive fuel also raises transportation, distribution, and shipping costs, which can quickly translate into higher prices for food, deliveries, and services. Lowering the price is intended to reduce at least some of that pressure and prevent the increase at gas stations from spilling over into the prices of other products.

Ultimately, the move contains a certain irony. The state imposes a heavy tax on every liter of gasoline, and to shield the public from what had become a record-high price, it is now temporarily giving up 50 agorot of the tax it imposed in the first place.