Netanyahu and Smotrich cut Israel fuel tax after record price spike

Tax cut lowers prices at the pump

Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich have stepped in to cut Israeli petrol prices by 50 agorot per litre, rolling back a recent surge that pushed fuel costs to record highs.

The reduction, which took effect at midnight on Monday, was triggered when Smotrich signed an order on Sunday to slash the state's fuel excise tax. The intervention brings the maximum price of 95-octane petrol down to NIS 7.77 per litre, down from the record NIS 8.27 that drivers had been facing.

By temporarily lowering the excise tax, the government is absorbing the cost of recent price hikes itself, relinquishing a portion of the tax revenue it usually collects from motorists at the pump.

The global surge behind the spike

The tax cut follows a painful week for Israeli motorists. At the end of September, gasoline prices hit an all-time high of NIS 8.27 per litre — equivalent to more than $10 a gallon. On 1 October alone, the maximum price at the pumps jumped by 52 agorot.

According to the country's Energy Ministry, the sudden spike was the result of a double blow: a 13 per cent leap in global fuel prices caused by supply chain disruptions and wider instability in the Middle East, coupled with a weakening shekel. The US dollar strengthened by roughly 3 per cent against the Israeli currency over the period, significantly driving up the cost of importing refined oil.

Smotrich had previously introduced tax cuts to keep prices stable, but those earlier interventions were completely overwhelmed by the scale of the global market rise.

Domestic economic pressures

In a statement released through the Government Press Office, the administration sought to reassure the public that it was keeping a tight grip on the cost of living.

"At a time when fuel prices are soaring all over the world, we are ensuring that they do not soar in Israel," the statement said.

The government also pointed to its energy policy as a broader success story, claiming that Israel's electricity prices are now among the lowest in the Western world. It attributed this to its insistence on developing offshore natural gas reserves and opening up electricity production to greater competition.

"The Israeli economy is breaking records," the statement said."We will continue to navigate it responsibly."

While the tax reduction offers immediate relief for consumers, the government has not said how long it can afford to subsidise fuel prices if global oil markets remain volatile.