Expanding tax cut set to expire as gasoline prices approach nine shekels

The temporary reduction in Israel's gasoline excise tax is scheduled to end on November 3. This expiration coincides with rising global oil prices, creating conditions that could push the cost of 95-octane fuel above NIS 9 per liter. The current pump price stands at NIS 7.77.

Finance Minister Bezalel Smotrich implemented the tax cut last month to limit price increases ahead of the upcoming elections. An initial order signed one month prior had lowered the tax by NIS 0.50 per liter. As crude oil prices climbed, Smotrich doubled the reduction to NIS 1.00 per liter.

The Finance Ministry's Budget Department estimates that the tax reductions over the past two months will cost the state approximately NIS 467 million. This expenditure occurs while defense spending has reached record levels due to the ongoing war. Under standard conditions, taxes account for more than 60% of the retail gasoline price and generate roughly NIS 20 billion in annual state revenue.

Crude oil prices have increased by about 10% compared to late September. This rise is attributed to expectations of a third round of conflict involving Israel, Iran, and the United States. The Energy Ministry's Fuel Administration set the October gasoline price during that earlier period.

If the tax cut remains in effect, gasoline prices are expected to rise by approximately 30 agorot per liter. This would place the cost at just over NIS 8. If the reduction lapses as planned on November 3, the price could exceed NIS 9.

The final price will be determined by the Fuel Administration toward the end of the week based on Mediterranean basin oil prices. The new rate may take effect as early as Saturday night and could remain in place for only a few days.

Smotrich faces a decision after the elections on whether to extend the relief. If it becomes clear that the current government will not remain in power, he may allow prices to surge, leaving the economic burden to the next administration.