Fuel Prices to Drop Briefly Before Sharp Rise Next Week

The price of gasoline in Israel is set to decrease to 7.35 shekels per liter for self-service starting Sunday, following a reduction in fuel taxes. However, this relief is expected to be short-lived, as prices are projected to surge to 8.35 shekels per liter by Thursday, November 5. This increase is attributed to the expiration of a tax reduction order signed by Finance Minister Bezalel Smotrich in early October. The order had previously reduced excise and VAT taxes on fuel by one shekel per liter.

Gasoline 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 mitigate sharp price hikes, Smotrich had previously issued orders reducing excise taxes, first by 0.50 shekels and then by a full shekel per liter (including VAT).

The tax reductions have resulted in an estimated monthly revenue loss of approximately 360 million shekels for the state treasury. Beyond the financial impact on the government, the excise tax reduction may distort the market, as the subsidized price does not fully reflect the current global fuel shortage. The International Energy Agency (IEA) anticipates that the supply of oil and refined products will continue to exert upward pressure on prices in the coming months.