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Sharp Price Hikes in Israel

February 27, 1979
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Sharp increases in the price of petroleum products, especially gasoline, went into effect at midnight last night boosting the cost of living index by about two percent and sparking a new controversy over the government’s fiscal policies. The price hikes were decided on yesterday by a special ministerial committee comprised of Finance Minister Simcha Ehrlich; Energy Minister Yitzhak Modai and the Minster of Commerce and Industry Gideon Patt.

the price of gasoline soared 39 percent compared to an average 32 percent for other types of fuel. A gallon of high octane gas sold for $2,50 today, up from $1,80 yesterday. But Israelis face still further price increases. The Knesset Finance Committee is expected to approve a 24 percent rise in the price of electricity to be followed by a boost in fares for public transportation, new increases in the prices of manufactured goods and of most products and services.

A spokesman for the Energy Ministry said ### that the increased price of fuel was necessary because Iran is no longer selling oil to Israel and supplies must be imported from “for and indirect” sources that are more expensive He also noted that world oil prices have risen “dramatically” since the revolution in Iran and the government had to raise the domestic price in terms of the Israel Pound.

Treasury officials are known to have warned against a sudden, massive rise in oil prices that would accelerate inflation. Their recommendation for gradual increases over the year was opposed by Modai who argued that a substantial hike now would encourage restraint in fuel consumption. According to recent statistics published here, Israel has one of the highest oil consumption per capita rates in the world.

However, Modai’s views prevailed. He announced today that the price increase would be accompanied by other energy saving measures now under consideration, including stricter limits ### the use of publicly owned vehicles and stricter enforcement of highway speed limits.


Both Histadrut and the Manufacturers Association protested vehemently today against the latest increases. Yeruham Meshel, Secretary General of Histadrut, said the measure would result in further deterioration of the national economy. He said he had received a letter from Ehrlich only a few days ago promising to reduce the inflation rate by 10 percent this year. “How could Ehrlich make-such promises when he knew that oil prices were about to go up?” Meshel asked.

Avraham Shavit president of the Manufacturers Association, said “Even now we have difficulty competing with European products. The new hikes are much higher than those in Europe and make it much more difficult to compete on the export market.” Shavit termed the projected 24 percent increase in the price of electric power “sheer chutzpa.” He insisted that a 17 percent rise would have been sufficient.

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