Israel raised the retail price for a liter of unleaded gasoline (95 octane), which is government-regulated, by 0.28 shekels ($0.077) to 7.22 shekels ($2.00) at the pump on the first day of the year 2024. This move coincided with the right-wing Finance Minister Bezalel Smotrich’s decision not to extend the previous fuel tax reduction.
The price hike follows increasing economic pressures on Israel's budget and economic activity as a result of the war on the Gaza Strip, which is nearing its third month. Consequently, Israel announced its intent to release five reserve military brigates and reduce interest rates by 0.25% in an effort to stimulate the economy.
The 2024 budget has yet to be approved; therefore, the Ministry of Finance does not have a budgetary source to cover the drop in revenue, according to the law.
According to the Israeli economic newspaper "Globes," funding for gasoline tax reductions is not a priority for the Ministry of Finance in the 2024 budget, which requires significant spending cuts to offset the costs of the war.
The monthly cost to the Israeli treasury for subsidizing gasoline prices ranges between 100 and 200 million shekels ($27.56 and $55.12 million), depending on global market price fluctuations and the exchange rate of the shekel to the dollar.
For the 2023 budget, the Israeli Ministry of Finance allocated 1.1 billion shekels ($303.18 million) to lower fuel taxes. These reductions have been in effect since April 2022, when former Finance Minister Avigdor Lieberman first introduced them following the outbreak of the Russian-Ukrainian war.
