Israel Braces for Another Sharp Fuel Price Hike Amid Global Tensions

Consumers in Israel are anticipating another significant increase in fuel prices, expected to take effect by Thursday midnight. Energy market analysts predict a jump of approximately 25 to 40 agorot per liter, which would push the price of a liter of 95-octane gasoline above the psychological threshold of 8 shekels for self-service pumps. This price hike, attributed to ongoing instability in the Strait of Hormuz, represents a further blow to household budgets, potentially adding 15 to 20 shekels to each refueling and impacting the consumer price index.

This anticipated rise follows a series of continuous increases in recent months, driven by global crude oil price surges and the weakening of the Israeli shekel against the dollar. These escalating costs have placed considerable pressure on households and intensified public calls for government intervention. In response, Finance Minister Bezalel Smotrich approved a temporary reduction of 50 agorot per liter in fuel excise tax (blue tax) in early September. This measure, intended to provide temporary relief, was approved for a limited two-month period, covering September and October.

However, the upcoming price increase threatens to largely negate the benefit of the tax reduction, potentially nullifying its impact sooner than expected. Experts warn that without an extension of the tax cut into the winter months, fuel prices could return to record highs. This would exacerbate the cost of living, dampen private consumption, and complicate the Bank of Israel's efforts to lower interest rates.

The situation also poses a complex challenge to the consumer price index. While the September price stabilization may have offered short-term relief to inflation figures, the October increase, coupled with the potential expiration of the tax break at the end of the month, is expected to have the opposite effect. The October index could see a significant jump not only from the direct fuel price rise but also from a domino effect, as higher energy costs increase transportation and production expenses for a wide range of goods and services, including manufacturing, air travel, and local authority operations.