Finance Ministry Professionals Oppose Fuel Price Hike Freeze

Professional staff within Israel's Ministry of Finance are reportedly opposing a plan by Finance Minister Bezalel Smotrich to prevent a significant fuel price increase scheduled for midnight between Monday and Tuesday. The concern among Treasury officials is the potential for further budget overruns and the inefficient use of subsidized fuel.

Calculations by the Finance Ministry indicate that a subsidy of 16 agorot per liter, which would fully prevent the price hike, would cost the state approximately 50 million shekels per month. This figure rises to 100 million shekels by the upcoming elections and an estimated 200 million shekels until a new government is formed thereafter. Furthermore, discussions are underway regarding a potential reduction exceeding 16 agorot, aiming to lower the price towards 8 shekels per liter, a move that has not been attempted before and would deepen the subsidy.

The Finance Ministry is awaiting legal counsel's opinion on whether a substantial financial benefit to the public during an election period, especially one that goes beyond maintaining current prices, complies with legal standards. The price of fuel was set to reach an all-time high of 8.25 shekels per liter for self-service stations starting September 1st, matching the previous record from September 2012. Over the past two months, fuel prices have already surged by a cumulative 77 agorot, translating to about 200 shekels per month for an average vehicle.

Of the 16 agorot increase in the current phase, 6 agorot are attributed to government decisions: linking fuel taxes to the consumer price index three times annually and increasing the marketing margin for fuel companies twice a year. This marketing margin increase benefits fuel companies financially, despite a lack of proven justification based on their expenses, especially as they employ fewer staff due to the shift to self-service. Employees in adjacent convenience stores are also factored into the gasoline tariff, even though these stores generate separate, high profits for energy companies. The government initiated a process in 2022 to revise this formula, but the appointed committee has yet to complete its work, leading to an automatic, twice-yearly update of the marketing margin based on outdated data, the cost of which is borne by drivers.

Smotrich's office stated that the Finance Minister has ordered the promotion of a reduction in excise tax on gasoline to counteract the expected price increase, driven by the global energy crisis and tensions with Iran. Professional discussions are ongoing to determine the exact reduction amount and mechanism, with the minister intending to sign the order soon for the reduction to take effect in the coming days. The article also references a past video of Prime Minister Benjamin Netanyahu visiting a gas station when prices were 8.08 shekels, 15 agorot less than the projected new price.