Ministries to Lay Off Staff to Keep Pump Prices Down

Steinitz: Israelis prefer higher prices to a nuclear Iran.

Government ministries will be paying the price following Prime Minister Benjamin Netanyahu's last-minute decision to throttle the increase in gasoline prices last night: They will be laying off 2% of their staff.

The price of a liter of gasoline will be increasing only 5 agorot for April, instead of 20 agorot, as had been planned. After the increase, a liter of 95-octane gasoline at a full-service pump will cost NIS 8. See story, Page A1.

In order to keep prices down, the government is decreasing taxes on gasoline. This happened a month ago as well.

Gasoline and electricity prices have been threatening to rise steadily due to increasing global oil prices.

The tax cuts of the past two months will be costing the government NIS 540 million in lost revenue this year. In order to make up for the budgetary shortfall, all government ministries will be laying off 2% of their staff. This excludes policemen, hospital nurses and career soldiers.

Israeli citizens "prefer spending more than facing a nuclear threat," said Finance Minister Yuval Steinitz last night, shortly before Netanyahu announced he would be intervening in the planned price increase.

Speaking on Channel 2's "Meet the Press," Steinitz said he and Netanyahu were looking into all options to address rising fuel prices.

Gas prices are increasing around the world due to the sanctions on Iran, he said.

His statements came a day after U.S. President Barack Obama vowed to forge ahead with sanctions on Iran, saying there was enough oil in the world market - including emergency stockpiles - to allow countries to cut Iranian imports.

A sanctions law that Obama signed in December requires him to determine every six months whether the price and supply of non-Iranian oil are sufficient to allow consumers to "significantly" cut their purchases from Iran.

Last night, Steinitz said Israel's gas taxes were low compared to those in Europe, and said they should not be cut. In exchange for their tax money, citizens receive services such as education, health care and welfare, he noted.

Gasoline taxes have drawn fire in the debate over rising prices in Israel. Local gasoline prices are hitting all-time highs even though the price of crude oil is currently only around $124 a barrel, which is significantly lower than the record of $147 set in 2008. Thus, local rates are setting records due to increased taxation.

Steinitz also noted that, based on fuel prices alone, electricity prices should have increased 40% last night, but due to the government's intervention they were increasing by only 8.9%.

Next threat: Solar power

Meanwhile, the next threat is already in sight and it has nothing to do with oil prices: The electricity authority is scheduled to discuss offering additional subsidies for solar power installations. Demand for these subsidies is three times larger than available supply.

The regulator had stated in February that it would not be making more subsidy money available, since the government had met its goal for solar installations through 2020.

The subsidies are offered to encourage entrepreneurs to set up solar panels, which send electricity into the national grid. The entrepreneurs receive more for the electricity than consumers pay.

The subsidies approved to date have already pushed up power prices by 2%. If the regulator approves another 200 mega watts of solar fields, as it is currently considering doing, that would push up prices by another 1%.