Israel to Cut Fuel Tax by Half a Shekel Per Liter

Israel is moving to reduce the price of gasoline, following a recent surge that pushed the cost of a liter to a record high of 8.25 shekels. A draft order was published on Thursday to lower the fuel tax, which is expected to decrease the price per liter by approximately half a shekel. This tax reduction is slated to be in effect for September and October, with plans to extend it until February 2027, potentially influenced by upcoming elections.

Starting in October, all fuel price adjustments will factor in the reduced tax. The current excise tax rate stands at 3,652.52 shekels per thousand liters of gasoline and 3,378.52 shekels per thousand liters for gasoline blended with methanol. To achieve the half-shekel reduction, the excise tax on gasoline will be lowered to 3,232.79 shekels per thousand liters, and for methanol-blended gasoline, to 2,954.79 shekels per thousand liters.

Global energy prices have risen recently due to factors including geopolitical tensions and disruptions to major shipping routes like the Strait of Hormuz, impacting energy supply and driving up costs. While Israel has relative energy independence, making the price increases less severe than in many developed nations, domestic fuel prices still gradually climbed to the recent peak.

Despite some professional opposition within the Ministry of Finance, the draft order has received approval from the government's legal counsel, partly due to its proximity to the Knesset elections scheduled for late October. The Ministry of Finance estimates that this tax reduction will decrease state revenue by approximately 282 million shekels.