The price of gas

Higher excise duties are higher taxes – nothing but another indirect deduction from our incomes. They aren’t carved in stone.

PM Netanyahu with Prof. Manuel Trajtenberg 311 (R) (photo credit: Marc Israel Sellem)
PM Netanyahu with Prof. Manuel Trajtenberg 311 (R)
(photo credit: Marc Israel Sellem)
Just as the New Year was ushered in, Rothschild Boulevard tents were dismantled and the Trajtenberg recommendations were made public, the taxman presented the citizenry with a holiday gift – another gasoline price-hike.
But this is no straightforward hike. Indeed it appeared to have been hatched in Yiddish folklore’s mythic hamlet of Chelm. With exasperating consistency, whenever Chelm’s denizens brainstormed to find a solution to a pressing problem, they ended up making a bad situation remarkably worse. Their tradition apparently survives impressively in the Jewish state’s Treasury.
The newest hike was the one canceled at the height of the social protest to placate public opinion. Now the Finance Ministry must have concluded that things have sufficiently calmed down, making the time ripe to inflict what was too excessive-cum-explosive a mere two months ago.
The arbitrariness of the move irks more than the small (0.23 percent) addition to the overkill of what we’re anyway charged. There’s no excuse now for any increase. International market conditions, in fact, mandate a reduction. Oil prices fell recently on international bourses. The rise, however, is 9 additional agorot per liter – all in excise tax.
Strictly speaking, the Treasury follows a set formula based on end-of-the month fuel prices in France and Italy, minus European taxes and plus Israeli excise tax. The trouble is that the excise duty keeps rising.
Therefore, Israelis pay more at the pump than anywhere in the Western world. The price of gasoline in Israel, if calculated in American terms, is one of the highest in the world – about $8 per gallon.
But it’s bad by European standards too. Earlier this year our intuitions received empirical backing from the Knesset Research Center, tasked by the Knesset Economics Committee with collecting and processing comparative-price data. The bottom line was that we shell out over 30% more per liter of gasoline than the average in 15 Western European countries. The gap is ever-widening, due to continuous excise increases here.
At the end of July, Prime Minister Binyamin Netanyahu – responding to an irresistible groundswell of discontent – decreed that the steep 31-agorot excise increase then-scheduled would be frozen.
It’s now being gradually thawed. The latest hike marks only one phase in returning to the temporarily paused excise-hike timetable. In January we’re due to be hit with a whopper – 40 more agorot per liter.
None of this is even remotely connected to the cost of crude oil. We pay exceedingly more for our gasoline for no other reason than that we are taxed more for each drop. The heavy financial burden placed on us is artificial and not an objective inevitability.
Moreover, this doesn’t merely affect individual household finances. Fuel prices fuel the cost-of-living spiral, contribute to inflation and harm business and industry to the point of jeopardizing jobs. Unwarranted taxation strangles growth.
Over half of our gasoline outlays go to taxes. Also contributing to the outrage is the fact that marketing profit margins here are nearly double what gas companies charge in Europe. This, coupled with excessive taxation, keeps our fuel prices disproportionately high.
It serves everyone but the consumer. Profits enrich corporations while fuel excise plays a cardinal role in the government’s deficit-reduction efforts.
This is why the Treasury won’t let go of its excise-hike schedule. The summer lull was a barefaced device to calm the commotion. The old formulaic excise hikes have not been abolished.
The Trajtenberg Committee recommendations don’t include a reduction in the hallowed excise component of fuel prices, but they do demand an end to endless successive hikes. Yet the recent hike occurred after the Trajtenberg Report was submitted to the government.
The Treasury’s supplementary Chelm-like justification for ever-higher gasoline excise duties is that they boost environmental protection by forcing people to resort to public transport. Yet in the frustrating reality of Chelm, bus and cab fares soar concomitantly with excise hikes. If anything, the summertime demonstrations should have shown quite unambiguously that the public isn’t falling for lame excuses.
Higher excise duties are higher taxes – nothing but another indirect deduction from our incomes. They aren’t carved in stone.