Israel Fuel Prices to Drop Temporarily, Then Spike Sharply

The price of gasoline in Israel is set to decrease significantly this coming Sunday, dropping to NIS 7.35 per liter from the current NIS 7.77. However, this reduction is temporary, lasting only four days. The decrease is due to a temporary cut in excise duty on fuel, which is scheduled to expire on November 4.

If the excise duty cut is not extended, the price of gasoline is expected to jump by a full shekel, reaching NIS 8.35 per liter. This price remains historically high due to a combination of elevated global oil prices, with Brent crude currently at $115 per barrel, and a substantial "refining spread."

The high oil price is attributed to Iran's blockade of the Strait of Hormuz, which impedes crude oil transport from the Persian Gulf. Although oil is now flowing through the strait similarly to pre-war levels, increased transit costs and geopolitical fears of further escalation have significantly inflated crude oil prices.

Furthermore, a considerable portion of global refining capacity is located beyond Hormuz and has been impacted by long-range Ukrainian attacks on Russia, a major fuel exporter. These factors contributed to the highest-ever October fuel price of NIS 8.77 per liter, prompting the government to approve two excise duty reductions before the elections: NIS 0.50 per liter, followed by another NIS 0.50 per liter reduction.

This excise tax reduction, approved by decree until November 4, lowers the fuel price by a total of NIS 1 per liter. This creates a unique situation where fuel prices will fall at the beginning of the month but are poised to surge back to a very high NIS 8.3 per liter on November 4, unless the Ministry of Finance decides to extend some or all of the reduction.