Gasoline Prices Reach New Heights

Even though PM agrees to cut gas taxes by 10 agorot for one month.

The maximum price for regular 95 octane self-service gasoline went up at midnight by 3.8 percent, to an all-time high of NIS 7.74 per liter.

It would have gone up by another 10 agorot a liter, but Prime Minister Benjamin Netanyahu announced a 10-agora reduction in gasoline taxes.

Benjamin Netanyahu - Moshe Milner
Moshe Milner / GPO

"The country doesn't control world oil prices," Netanyahu said yesterday, "but we don't have to collect additional tax on each price rise." It is not clear how the state will make up for the loss of the tax revenue.

Netanyahu came to the decision shortly before the main television newscasts last night, just hours before the new price went into effect at midnight.

The Finance Ministry had objected to cutting the gas tax. "This is not the time to forgo taxes on fuel and budgetary discipline," the ministry's acting director general, Doron Cohen, said earlier this week. But Netanyahu overruled it.

The 10-agora tax cut currently affects the price of gasoline for this month only, so it is likely the issue will soon be back on the public agenda. The chairman of the Knesset's Economic Affairs Committee, Carmel Shama-Hacohen (Likud ), said he would convene his committee on Monday to take up the fuel price issue.

The maximum price for gasoline is adjusted on the first of every month based on the price of oil around the Mediterranean. It is also affected by the shekel-dollar exchange rate. The latest price hike is the result of a 10 percent rise in fuel prices in Europe and a 1.2 percent increase in the value of the dollar.

Since the start of the year, the maximum price for gasoline has risen by 63 agorot a liter. Diesel prices, which are not subject to government price controls, are also expected to go up.

Over the past decade, gas prices have risen substantially. In March 2003, a liter of gas cost NIS 4.80. But by March 2006, drivers were required to shell out NIS 5.61 per liter, and in March of last year, the price was NIS 6.55.

With the summer's social protests hovering in the background, the government was under mounting pressure to cut gas taxes once it became clear that the price of gasoline would rise sharply. Taxes represent about 52 percent of the maximum retail price for gas. Rising fuel costs also generally lead to higher public transportation fares.

"When you go into a gas station, you shouldn't have a sense that you are going into a tax station," said Energy and Water Resources Minister Uzi Landau. "When the taxes on fuel are more than 50 percent of the price to the consumer, something here is over the top." He proposed financing the reduction in excise taxes by an across-the-board cut in the budgets of government ministries. "Every ministry should do its part, including my ministry," he said.

Nonetheless, the Knesset yesterday voted down two bills that would have lowered the price of gasoline. One, by Kadima MK Yoel Hasson, would have limited the amount the government could collect on every liter of gasoline. It was rejected by a vote of 36-25. The MKs also voted down a bill by Kadima MK Meir Sheetrit that would have eliminated value-added tax on the portion of the gas price that is actually another tax, the excise tax.