Smotrich fuel tax cut set to expire before next week's pump price update

Israeli drivers may face a sharp increase in gasoline costs as a temporary tax cut introduced by Finance Minister Bezalel Smotrich expires on November 3. The end of this relief measure, combined with climbing global oil prices, could push the cost of 95-octane gasoline above 9 shekels per liter. The current price stands at 7.77 shekels.

Smotrich implemented the excise tax reduction in September to prevent fuel prices from spiking ahead of the upcoming elections. An earlier order, signed in August, had lowered the tax by 0.50 shekels per liter. As oil prices rose, the finance minister doubled that reduction to 1 shekel per liter.

Taxes typically account for more than 60% of the gasoline price in Israel, generating approximately 20 billion shekels in annual state revenue. According to the Budget Department of the Finance Ministry, the reductions applied over the past two months are estimated to cost the state 467 million shekels. This expenditure occurs while defense spending reaches record levels due to the ongoing war.

The first price increase is expected as early as Saturday night. Expectations of a third round of conflict involving Israel, Iran, and the United States have lifted oil prices by about 10% compared with late September. That was the period when the Energy Ministry's Fuel Administration set the gasoline price for October.

If the tax cut remains in place, gasoline is expected to rise by approximately 30 agorot per liter, bringing the price to just over 8 shekels. If the reduction lapses as scheduled, the price could climb above 9 shekels.

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.

Smotrich will need to decide whether to extend the relief after the elections. If it becomes clear that the current government will not remain in office, he may allow prices to surge, leaving the economic consequences to the next administration.