The maximum price of 95 octane gasoline at self service pumps will be lowered by NIS 0.29 per liter, from NIS 6.38 to NIS 6.09, a 4.55% cut, on September 1 (midnight Monday night). The decrease comes on top of a NIS 0.27 cut last month. The decrease was offset by a NIS 0.04 increase in the excise tax on gasoline.
The reason for the price cut is last month's drop in oil prices. Oil lost a third of its value over the past two months, with the price of oil reaching its lowest point since March 2009. Last week, oil was traded around $38 a barrel. The plunged in oil prices is a result of record production by the OPEC oil cartel. Saudi Arabian alone has increased its daily oil production by 430,000 barrels to 7.37 million barrels.
Additional reasons for the slide in oil prices last month are expectations that the US will raise the interest rate next month, a surprising increase in oil inventories, and talks on the removal of sanctions imposed on Iran. The removal of sanctions is liable to significantly increase the supply of oil at a time when demand is relatively low.
After a 20% drop since the beginning of the month, however, the price of WTI oil zoomed 10.3% on Thursday, the steepest one-day rise since March 2009. The reason is Venezuela's request for an emergency meeting of OPEC. Reports say that Venezuela wishes to discuss the sharp decline in the price of oil with Russia, which is not an OPEC member. Oil jumped an additional 6.3% on Friday, due among other things to news of lower production by Nigeria and high US economic growth in the second quarter of the year, which makes it likely that demand for oil in the US will grow.
After soaring 17% in two days, the steepest two-day rise in the past 25 years, the price of Brent oil fell to $50 today, and the current price of a barrel of WTI oil is $45.
Oil price fluctuations are not directly reflected in the price of gasoline in Israel, due to the heavy taxes levied on fuel prices. The tax component accounts for over 60% of the price of fuel, thereby moderating the effect of a drop in oil prices on the final price of fuel. The drop in the price of oil this month was offset by the Israel Tax Authority's decision to raise the excise tax on gasoline.
Published by Globes [online], Israel business news - www.globes-online.com - on August 30, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015