Israel Braces for Fuel Price Hike as Global Tensions, Dollar Strength Drive Costs

Fuel analysts predict a significant rise in gasoline prices in Israel starting October 1st, with 95-octane fuel expected to increase by 25-40 agorot per liter, pushing the price above 8 shekels at self-service stations. This would add an estimated 15-20 shekels to the cost of a full tank for Israeli drivers. The current price for 95-octane gasoline at self-service stations is 7.75 shekels, with full service costing an additional 0.26 shekels per liter.

This anticipated price surge is attributed to two primary factors: a sharp increase in global oil prices, exacerbated by rising tensions in the Strait of Hormuz, and the strengthening of the US dollar against the Israeli shekel. These global trends are compounded locally by the dollar's appreciation.

Previously, in July, gasoline prices in Israel decreased by 0.32 shekels per liter, falling to 7.48 shekels, a trend linked to a temporary de-escalation of tensions with Iran and the opening of the Strait of Hormuz. However, since then, Brent crude oil prices have approached $100 per barrel, and the dollar has risen from 2.98 to 3.05 shekels.

This potential price increase follows a period of volatility. In September, the regulated price of gasoline reached a 14-year high of 8.25 shekels per liter, a jump that surprised analysts who had predicted a decrease. The Ministry of Energy attributed this rise to a roughly 6% increase in international gasoline prices, only partially offset by a 3% decrease in the dollar's exchange rate.

The historical peak for 95-octane gasoline was also 8.25 shekels per liter, recorded in September 2012. At that time, Prime Minister Benjamin Netanyahu first proposed a reduction in fuel excise taxes. While this tax relief was later canceled, it was reinstated in the summer of 2022 by Finance Minister Avigdor Lieberman, leading to prices exceeding 8 shekels again and prompting government intervention to temporarily lower excise duties.

Fuel prices in Israel are typically adjusted monthly based on a formula that considers average Mediterranean gasoline prices over five trading days, the dollar exchange rate, distribution costs, and taxes.