Smotrich's fuel tax cut ends November 3, risking NIS 9 gasoline

Israeli drivers face a potential spike in fuel costs as a temporary tax break introduced by Finance Minister Bezalel Smotrich is set to expire on November 3. The end of this relief coincides with rising global oil prices, creating a scenario where the cost of 95-octane gasoline could exceed NIS 9 per liter. Currently, the price stands at NIS 7.77.

Smotrich implemented the initial reduction in the state's excise tax last month to prevent fuel costs from climbing ahead of the upcoming elections. A prior order signed a month earlier had lowered the tax by NIS 0.50 per liter. As oil prices continued to rise, the finance minister doubled that reduction to NIS 1.00 per liter.

Taxes typically account for more than 60% of the final price of gasoline in Israel, generating approximately NIS 20 billion in state revenue annually. According to the Finance Ministry's Budget Department, the reductions enacted over the past two months are expected to cost the state roughly NIS 467 million. This expenditure occurs at a time when ongoing conflict has driven defense spending to record levels.

Following the elections, Smotrich must determine whether to extend the tax relief. If the current government is unlikely to remain in power, he may allow prices to rise, leaving the economic burden to the next administration. Expectations of a third round of fighting involving Israel, Iran, and the United States have already lifted oil prices by about 10% compared to late September, when the Energy Ministry's Fuel Administration set the current October price.

Analysts predict the first price increase as early as Saturday night. Even if the tax cut remains in place, gasoline is expected to rise by approximately 30 agorot per liter, bringing the total just over NIS 8. If the reduction lapses entirely, the price could climb above NIS 9.

The final price will be determined toward the end of the week based on oil prices in the Mediterranean basin. The new rate may remain in effect for only a few days before the next adjustment.