Fuel Prices to Drop Briefly Before Sharp Rise Next Week

The price of gasoline in Israel is set to decrease to NIS 7.35 per liter for self-service starting Sunday morning, following a reduction in fuel taxes. However, this relief is expected to be short-lived, as prices are projected to surge to NIS 8.35 per liter by Thursday, November 5.

This anticipated increase is attributed to the expiration of an order signed by Finance Minister Bezalel Smotrich in early October, which reduced excise taxes (Mas Blau) and VAT by a full shekel per liter. The order was initially intended to mitigate a sharp rise in fuel costs.

Fuel prices in Israel are regulated and determined monthly by the Ministry of Energy, based on average Mediterranean gasoline prices and the dollar exchange rate. Recent months have seen rising refining margins, caused by global supply chain disruptions, including issues at the Strait of Hormuz and damage to refineries in Russia.

To counter these rising costs, Smotrich previously issued orders reducing excise taxes by 50 agorot and later by a full shekel per liter, including VAT. These tax reductions have resulted in an estimated monthly loss of NIS 360 million in state revenue.

Beyond the fiscal impact, the tax reduction may distort the market by preventing prices from fully reflecting global shortages. The International Energy Agency (IEA) forecasts continued upward pressure on oil and refined product prices in the coming months due to supply constraints.