Israel’s Mixed Economic News: Gas Prices Soar, Unemployment Drops

UPDATE 9 am Israel time Friday:

At 5:56 am this morning, two Palestinian rockets fired by terrorists in Gaza struck Sderot. One hit an open area within the city; the other crashed through the roof of a house–one of whose residents had to be hospitalized for trauma. It was the second time the house has been hit in recent years.

Where, one may ask, was the Iron Dome? As your humble servant pointed out several days ago, it appears that the IDF has inexplicably taken one of the Iron Dome batteries away from the Sderot area and put it near Eilat.

In other news, as the so-called “Non-Aligned” countries began ending their anti-Israel conference in Tehran, Iran announced yesterday that it has increased its number of centrifuges to 2154 (there were 700 in February and 1064 in May). Obviously the sanctions imposed by the West are having no effect on the Iranian nuclear program.

TODAY’S BLOG:

What is everyone talking about in Israel this morning? It’s not the absurd goings on at the “Non-Aligned” Movement’s hatefest in Tehran; it’s not the resignation of the Jerusalem police chief under sexual allegations; it’s not the latest massacre in Syria or even the impending “semi-evacuation” of Migron.

What everyone is talking about is the price of gasoline.

All Israelis will be suffering from gas pump shock on Sunday morning (picture courtesy of www,vosinias.com).

At midnight tonight, the price will increase from 7.70 shekels to 7.77 shekels per liter. Tomorrow night at midnight, the price will further increase to 8.25 shekels per liter. In U.S. dollars, this means that gasoline in Israel will now cost $2.04 per liter (or $7.72 per gallon). In terms of Euros, the cost will be 1.63 Euros per liter (6.17 Euros per gallon).

This is the most that gasoline has ever cost here. In fact, it is the third highest price in the world after Norway and Turkey.

Why has it zoomed to a record level?

The cost of gasoline in Israel is determined by:

1. the VAT (Value Added Tax) which is rising from 16% to 17% tonight

2. the price of oil which rose 14% in July (it is hoped that with the new Mediterranean discoveries that Israel will become an oil exporter by 2015)

3. the shekel’s depreciation against the dollar: the exchange rate this morning is $1 = 4.036 shekels. In the last 12 months, the shekel has depreciated about 18% in relationship to the dollar.

It should be pointed out that about half of the cost of gasoline goes to taxes. And where do the taxes go? To fund the ever-increasing cost of social programs. One of the ironical aspects of the situation this morning is that the people who were doing the most protesting last summer and in the last few months about the need for more governmental assistance–are the ones howling the most about the cost of gasoline.

Amidst all of the talk about gasoline today comes the unexpectedly good news that the unemployment rate has dropped to 6.5% apparently as a result of increased manufacturing fueled by increasing exports and consumer spending.

Israeli products leaving Israel for international destinations (picture source: Zim Shipping).

According to Finance Minister Yuval Steinetz: “The labor market is functioning well. To preserve fast growth and low unemployment and protect citizens of Israel from the global crisis, we have to be extremely careful to preserve economic and fiscal discipline.”

To that end, Bank of Israel head Stanley Fischer said that the government must cut the budget by $4.2 billion to contain Israel’s gradually increasing deficit.

But to repeat, Israel’s exports, which form about 40% of Israel’s GDP (Gross Domestic Product), are increasing.

A huge quartz-surface manufacturing facility (for such things as kitchen countertops) in Caesarea.

In light of the international campaign to try to get people to boycott Israeli goods, your humble servant finds this export increase to be very good news indeed.

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