Israel Cuts Fuel Tax Amid Record High Gasoline Prices

Israeli Finance Minister Bezalel Smotrich signed an order on Sunday to reduce the excise tax on fuel for the next two months, citing a sharp increase in gasoline prices. The Ministry of Energy sets gasoline prices at the beginning of each month. On September 1st, prices rose by 0.16 shekels per liter to 8.25 shekels ($2.74) per liter, an all-time high that angered residents. A gallon of gasoline in Israel costs $10.41, among the highest globally. Fuel excise tax, known as "blue," constitutes about 44% of this price, amounting to 3.66 shekels per liter at the start of the month. Value-added tax makes up 15%, and global oil prices account for 33%.

Smotrich's order will cut the tax by 0.5 shekels per liter, lowering the gasoline price to 7.75 shekels per liter starting Monday midnight. Brent crude futures settled on Friday at their highest since July 24th, reaching $96.28 per barrel, as Middle East tensions fueled concerns over global supply. Israel has not been involved in recent fighting since an April ceasefire.

Last week, the Bank of Israel lowered its key interest rate by 25 basis points for the third consecutive time, attributing the move to declining and stable inflation. Smotrich stated at the time that further monetary easing was necessary. Andrew Abir, Deputy Governor of the Bank of Israel, told Reuters that additional interest rate cuts are possible if price pressures remain stable and depending on the economy's response to the three consecutive rate cuts.