Israel Faces Record Gas Prices Amid Pre-Election Tax Cut Debate

Gasoline prices in Israel reached a record high of 8.27 shekels per liter in early October, an increase of 0.52 shekels from September, despite a previous fuel tax reduction. This surge occurs shortly before the October 27th elections, prompting the Ministry of Finance to explore a new tax cut that could potentially lower prices to around 7.77 shekels per liter.

Accountant Majd Karam highlighted the government's dilemma: record fuel prices coinciding with a proposed pre-election tax reduction, raising legal scrutiny over the timing. He explained that the current price, the highest ever recorded, would have been even higher without the September tax cut, which was intended to keep prices around 7.75 shekels. However, rising global oil prices and a strengthening dollar negated the effect of the previous reduction.

Karam noted that global gasoline prices rose approximately 13% and the dollar increased by about 3% during the pricing calculation period, directly impacting the cost in Israel. The Ministry of Finance is considering a reduction of about 0.50 shekels per liter for one month, pending approval from the Attorney General.

Karam warned that the impact of high fuel prices extends beyond vehicle refueling, affecting transportation, production, and service costs, ultimately influencing the prices of daily goods. He pointed out that while the fuel tax is the finance minister's primary tool for direct price control, other price components are tied to global markets and exchange rates. Reducing the tax also means a loss of state revenue.

The current price of 8.27 shekels per liter remains in effect until the necessary approvals for any new reduction are finalized. The previous tax cut also required exceptional legal approval due to its proximity to an election.