Israel Cuts Fuel Tax by Half Shekel Amid Record High Prices

The price of gasoline in Israel dropped by half a shekel per liter at midnight, following an exceptional legal approval to reduce excise tax during an election period. The new price for a liter of 95 octane gasoline at self-service stations is now 7.75 shekels in central Israel. This reduction comes after a legal hurdle was cleared, allowing the Finance Minister to sign the decree. The previous price had reached a record high of 8.25 shekels per liter, matching a historical peak from September 2012. This surge was attributed to a roughly 6% increase in international gasoline prices, a routine adjustment of excise tax based on the index, and rising marketing margins and service fees due to minimum wage increases. The price hike also followed an ongoing trend over the past eight months, with fuel costs rising by nearly 1.5 shekels per liter due to regional tensions and increased energy prices in Europe.

Initially, professional officials within the Finance Ministry, including the Budget Department, Tax Authority, and chief economist, opposed the tax cut, citing concerns it would increase the deficit by approximately 155 million shekels monthly and violate directives for a caretaker government to avoid non-urgent measures. However, the legal advisor to the Finance Ministry, Dudi Koppel, argued to the Deputy Attorney General that the reduction was an urgent measure needed to alleviate public burden. He emphasized that the cut was time-limited and capped in amount, drawing parallels to similar reductions in past election periods. The legal opinion was ultimately approved, leading to the price decrease, which is expected to remain in effect until at least the end of October.

For full-service fueling, the additional cost per liter is now 26 agorot, bringing the total to 8.01 shekels. In Eilat, which is exempt from VAT, the maximum price for self-service gasoline has fallen to 6.49 shekels per liter, down from 6.99 shekels, with an additional 22 agorot for full service.