Fuel Prices in Israel Hit Record High Amid Global Market Turmoil

The price of gasoline in Israel is set to reach an all-time high of 8.27 shekels per liter starting midnight Wednesday. This represents an increase of 52 agorot, with an additional charge of 26 agorot for full service. In Eilat, where fuel is tax-exempt, the price for 95-octane unleaded gasoline will rise to 7.01 shekels per liter, an increase of 44 agorot, with a 22 agorot charge for full service.

The Ministry of Energy attributed the surge to a roughly 13% increase in international gasoline prices, driven by rising global oil costs and concerns over supply stability. This is compounded by a nearly 3% strengthening of the U.S. dollar against the shekel. The new price includes the reversal of a 50 agorot excise tax reduction that was in effect from September to the end of October 2026.

Economist Chen Herzog of BDO explained that the price hike is also influenced by the deepening crisis in the Persian Gulf extending to the Houthi conflict, alongside a global shortage in refining capacity. Factors such as the blockade of the Strait of Hormuz, the war in Ukraine, and damage to Russian refineries are contributing to these issues.

Last month, fuel prices had already climbed to 8.25 shekels per liter, matching the previous record set in September 2012. However, a temporary order by the Finance Minister had reduced the excise tax, bringing the price down. Herzog noted that the current increase highlights the ineffectiveness of such tax reduction policies, as the state must subsidize the difference from other sources without altering global trends.

While excise tax constitutes a significant portion of the fuel price, the current rise is primarily due to the cost of crude oil, which recently surpassed $100 per barrel. Herzog pointed to a triple market failure in the global oil market, involving the Strait of Hormuz, the Houthis, and Ukrainian attacks on Russian infrastructure, as the root cause of these elevated prices.