Israel Faces Potential Price Hikes as Fuel Costs Soar to Record Highs

Israel is bracing for a wave of price increases across various sectors as gasoline prices are set to reach an all-time high of 8.27 shekels per liter for 95-octane fuel. This surge is attributed to rising global oil prices, a 13% increase in international gasoline costs, and a roughly 3% strengthening of the US dollar against the shekel. The Ministry of Energy confirmed the significant price jump, which is 52 agorot higher than initially estimated.

The anticipated rise in fuel costs is expected to impact public transportation, goods shipping, electricity, and water prices. While electricity and water tariffs are scheduled for an update in January, shipping costs will likely increase immediately as supply companies face higher fuel expenses. There are concerns that manufacturers and importers may exploit the situation to implement further dramatic price hikes, exacerbating the already high cost of living in Israel.

In response to the impending price increases, the Israeli coalition government is exploring options to expand fuel subsidies. Finance Minister Bezalel Smotrich has instructed officials to prepare for additional subsidies, a move that would place a significant burden on the state treasury, which is already facing financial difficulties. This potential subsidy expansion, however, could encounter legal challenges due to its proximity to the upcoming elections.

The Ministry of Energy cited global market volatility and currency fluctuations as the primary drivers for the fuel price increase. While the strengthening shekel had previously mitigated some of the price hikes, recent weakening has removed this buffer. The article also notes that excise taxes constitute nearly half the price of a liter of gasoline in Israel, which has historically softened the impact of global price increases compared to other countries.