Israel's Finance Minister Pushes Fuel Tax Cut Amid Record Prices

Israeli Finance Minister Bezalel Smotrich has ordered a reduction in the excise tax on gasoline to prevent an anticipated price hike. The Ministry of Energy and Infrastructure's Fuel and Gas Administration announced that gasoline prices were set to rise by 16 agorot to 8.25 shekels per liter, including VAT, starting Tuesday night. This price matches a record high last seen in September 2012.

A portion of the price increase, approximately 5 agorot per liter, is attributed to an update in the excise tax component by the Tax Authority, linked to the consumer price index. Professional discussions are underway within the Finance Ministry to determine the exact amount of the tax reduction and the mechanism for its implementation. Smotrich intends to sign the order promptly to ensure the reduction takes effect in the coming days.

According to Bat Sheva Abuhazira, director of the Fuel and Gas Administration, other factors contributed to the rise. A roughly 6% increase in international gasoline prices was partially offset by a 3% drop in the dollar's exchange rate, resulting in an overall increase of about 10 agorot per liter from these global market shifts.

Despite a recent decrease in crude oil prices, which might have suggested a price drop, high refining costs have altered the situation. Chen Herzog, chief economist at BDO, explained that the refining margin, the difference between the price of refined fuel and crude oil, has surged by about 50% due to a global shortage of refined fuel products. This shortage is exacerbated by disruptions to refineries in the Persian Gulf and damage to Russian refineries amid the war in Ukraine.