Israel's Finance Ministry Backs 0.5 Shekel Fuel Discount Amid Record Prices

Israel's Ministry of Finance has approved a temporary discount of 0.5 shekels per liter on gasoline, set to last until October 2026. A similar adjustment is planned for imported fuel. The decision now rests with the government's legal advisor. The proposal, submitted by the Ministry of Finance's legal advisor Dudi Kopel on September 2, stems from a significant surge in gasoline prices over the past eight months. This price increase is largely attributed to the war with Iran, the closure of the Strait of Hormuz, and rising natural gas prices in Europe.

Regulated gasoline prices, which stood at 6.85 shekels per liter in January, climbed to a record 8.25 shekels per liter in September 2026. The proposed discount would apply only to state-regulated gasoline, excluding diesel and liquefied gas, whose prices are not controlled. If approved, the measure is estimated to cost the state approximately 155 million shekels per month, totaling around 310 million shekels. Funding for the discount will come from the Ministry of Finance's surplus, generated from personal import tax exemptions.

Concerns exist within the Ministry of Finance's economic, tax, and budget departments regarding intervention in pricing through fuel excise taxes. Such a move could widen the budget deficit during an economically challenging period caused by the war and potentially lead to future demands for further price reductions. The upcoming election period, which officially began on July 18, 2026, adds another layer of complexity, as the current government is considered transitional and is expected to exercise restraint on non-urgent matters.

However, Ministry of Finance legal advisor Kopel argues that the proposed discount is an urgent measure due to the high price levels. He emphasizes that the proposed actions are limited in scope and duration, drawing a comparison to a more extensive and longer-lasting excise tax reduction during the 2022 election period. Gasoline prices in Israel reached a record high of 8.25 shekels per liter on September 1, a development that surprised analysts who had predicted a slight decrease. The Ministry of Energy attributed the increase to a roughly 6% rise in international gasoline prices, only partially offset by a 3% decrease in the dollar's exchange rate. The previous record of 8.25 shekels per liter for 95-octane gasoline was set in September 2012, during which Prime Minister Benjamin Netanyahu first proposed a fuel excise tax reduction. A tax discount was later canceled, but reinstated in the summer of 2022 by then-Finance Minister Avigdor Lieberman when prices again exceeded 8 shekels.