Israeli gasoline prices may exceed nine shekels as tax break expires

Drivers in Israel could see the price of 95 octane gasoline rise above nine shekels per liter following the upcoming elections. This potential price spike is linked to the expiration of a temporary fuel tax reduction on November 3. The current price of gasoline stands at seven shekels and 77 agorot.

Finance Minister Bezalel Smotrich implemented the tax cut last month to prevent fuel costs from rising sharply before the vote. An earlier order signed a month prior had reduced the excise tax by half a shekel per liter. As global oil prices increased, Smotrich doubled the reduction to one shekel per liter.

Taxes typically account for more than 60 percent of the price of gasoline in Israel, generating approximately 20 billion shekels in annual state revenue. The Finance Ministry's Budget Department estimates that the tax reductions over the past two months will cost the state 467 million shekels. This financial outlay occurs as defense spending reaches record levels due to the ongoing war.

Smotrich must decide whether to extend the tax relief after the elections. If it becomes apparent that the current government will not remain in office, he may allow prices to increase, leaving the economic burden to the incoming administration. The first price increase is expected as early as Saturday night.

Expectations of a third round of conflict involving Israel, Iran, and the United States have driven oil prices up by about 10 percent compared to late September. This period is when the Energy Ministry's Fuel Administration set the gasoline price for October.

If the tax cut remains in place, gasoline prices are projected to rise by approximately 30 agorot per liter, moving the cost to just over eight shekels. If the reduction lapses, the price could climb above nine shekels. The final price will be determined toward the end of the week based on oil prices in the Mediterranean basin, with the new rate potentially remaining in effect for only a few days.