Israel Cuts Fuel Tax Again Amid Global Price Surge

The price of gasoline in Israel will decrease by 50 agorot per liter following an agreement between Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich to further reduce the fuel excise tax. This reduction is set to take effect on the night of Sunday, October 4th, leading into Monday, October 5th. After Smotrich signs the relevant decree, the maximum price for a liter of 95-octane gasoline at self-service stations will drop from a record high of 8.27 shekels to 7.77 shekels.

This marks the second consecutive month the government has offset rising global fuel prices by lowering the tax burden. In early September, the excise tax was already reduced by 50 agorot, which helped maintain the gasoline price at 7.75 shekels. However, a recent surge in global market prices caused fuel costs to increase by 52 agorot on October 1st, reaching an all-time high of 8.27 shekels per liter. Without the current tax relief, the price could have climbed to 8.77 shekels.

The initial tax reduction cost the state treasury approximately 268 million shekels, while the new cut is estimated to cost around 175 million shekels for the month. This decision was made despite objections from Ministry of Finance officials concerned about the budget impact and the lack of a clear funding source. The measure is also being implemented shortly before the October 27th parliamentary elections, a timing that previously raised legal questions.

However, the legal advisors of the Ministry of Finance and the government, including Gali Baharav-Miara, concluded that there are no legal obstacles to the additional excise tax reduction. In a joint statement, Netanyahu and Smotrich affirmed the government's commitment to preventing a similar price shock in Israel amidst global fuel price increases. They also linked Israel's relatively low electricity prices to the development of its gas fields and increased competition in power generation.

This current discount is temporary. If global prices remain high after the current reduction expires, fuel costs in Israel could rise sharply again. In September, global gasoline prices rose by about 13%, with oil exceeding $100 per barrel due to ongoing supply risks through the Strait of Hormuz.