Car Deals

Jerusalem, Israel David Rosenberg – It’s the Israeli driver versus the global economy and his government – and the guy behind the wheel is losing.

Motorists pulling into their local filling stations Tuesday morning were greeted with a pump price of 7.26 shekels a liter for the benchmark 95 octane fuel most cars in Israel use after prices were raised for the fifth time in as many months. That works out to $7.60 a gallon, the highest ever in Israel, including the days when world oil prices touched $145 a barrel in July 2008.

“If I’m driving on weekends more than 200 kilometers round trip I actually rent a car. It’s cheaper than filling up the family van,” said Dov Hoch, who lives in the Tel Aviv suburb of Ra’anana and topped up his tank the day before the latest price hike. “The savings on the gas pays for the rental.”

The cost of filling his Mazda mini-van was 450 shekels (about $121), compared with about 350-360 shekels ($95) not so long ago, he said. And, that was before the latest 1.7 percent price hike went into effect.

Hoch and Israel’s other drivers have met the energy equivalent of a perfect storm in the last two months. The price for benchmark Brent North Sea crude for delivery in March delivery reached $101.73 a barrel on Monday, its highest since Sept. 29, 2008.

Meanwhile, the shekel has been weakening against the dollar, raising the prices for fuel or other imports. Only a month ago, 3.54 shekels bought a dollar – on Tuesday, it took 3.69 shekels, 4 percent more. Indeed, the weaker shekel accounted for 0.12 shekel of the 0.13-shekel hike on Tuesday.

The Israeli government has also played a large role in the price increases. From Jan. 1, it boosted the excise tax on gasoline by 0.20 shekel, and it plans another increase a year from now. As recently as last June, the price for 95 octane was just 6.35 shekels ($2) per liter.

“That’s a major increase in a short time and it may well be that price will continue to rise due to increasing oil price,” Amit Mor, chief executive officer of the energy consulting firm Eco Energy, told The Media Line.

Oil analysts say that unrest in Egypt is threatening to choke the supply of petroleum shipped through the Suez Canal and they fear strikes and protests may spread elsewhere in the Middle East, which holds the world’s biggest reserves of oil.

Israelis aren’t big drivers by global standards. The country is tiny and its international borders are blocked to ordinary car traffic, so the longest trip can’t exceed a few hours.

There are only 251 passenger cars per 1,000 people in Israel, compared with 451 in the U.S. and 601 in Italy, according to the International Road Federation

Still that’s no comfort for the Israeli motorist. Since 2001, gasoline prices have risen 33 percent so that the cost of fueling a typical car traveling 15,000 kilometers a year is now 10,273 shekels ($2,775), up from 6,149 shekels — the equivalent of about a month-and-half’s wages — a decade earlier.

Not surprisingly, pump shock has emerged as a political issue. Israeli gasoline prices are subject to strict controls and are among the most heavily taxed in the world, with the government’s stake accounting for 56 percent of the price at the pump. Members of Israel’s parliament, the Knesset, have pointed to the unrest in Egypt and have warned that something similar could happen in Israel.

“Nations around us are turning out for mass demonstrations against dictators, to fight for equal rights and basic values – and especially because of the economic situation, with prices for basic commodities skyrocketing,” Aryeh Bibi, who represents the opposition Kadima Party, said this week. “It is no embarrassment to admit a mistake and to reduce the gasoline prices to what they were six months ago.”

The Finance Ministry justified the increase, saying on Monday that the higher excise tax was needed to ensure enough tax revenue as it lowers rates for personal and corporate income tax. It also justified a higher levy of fuel as a way of discouraging unnecessary driving and preserving the environment.

In spite of the storm in the Knesset, Egyptian-style protests haven’t materialized in Israel over gas. A call over the Internet to boycott gasoline stations didn’t gain much traction this week and a vote of no-confidence in the government on the issue of higher gasoline prices failed by a margin of 39 to 56 on Monday.

The Knesset Research Department found that the average price of gasoline in 15 Western European countries was 1.15 euros per liter in December 2010, while in Israel it was 1.41 euros – a difference of almost 25 percent. Related costs – marketing, delivery and profit — were 80 percent higher in Israel than in the European countries.

But ECO Energy’s Mor cast doubt on those comparisons. He said a study he conducted covering the month of January found Israeli pump prices were close to the average for Western Europe.

“Petrol prices in Israel are a bit high, but electricity prices are relatively low,” he said. “Those will have to rise in the long term to ensure a stable market environment. But gasoline prices are fine—they shouldn’t be raised any more.”

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