How the final consumer price of gasoline and diesel is calculated for Palestinians

- From the text of the report "The Coalition for integrity and accountability (AMAN) 2017 The General Petroleum Authority: Between Reality and Aspiration. Ramallah - Palestine."

- The sale price progresses from an amount of 1.74 shekels / liter of gasoline (the Israeli refinery selling price), and ended with the selling price to the Palestinian consumer of 6.23 shekels / liter of gasoline (the selling price of the Palestinian General Petroleum Authority)...!!

- Fuel prices in Israel are linked to global oil price movements, where the price average is calculated monthly for the last 5 working days of the previous month.

- The Palestinian side, represented by the General Petroleum Authority, is supplied with the refinery selling price, logistical expenses, and the Israeli refinery profit margin, from which the global evaporation percentage for gasoline, amounting to 5 per thousand, is deducted, and to which both the blu tax and value added tax are added.

- Accordingly, the General Petroleum Authority calculates fuel prices at the beginning of each month, after consultation with the Ministry of Finance, and then circulates them to stations, based on the amount of financial support intended to be provided by the Ministry of Finance to reduce the price for the Palestinian citizen!

- Below we list an example of how the final price for the Palestinian consumer was calculated for one (actual) month, for both gasoline and diesel, as follows:

· Calculation on the Israeli side

1- The Israeli refinery selling price, as determined by the "Israeli Ministry of Energy," and the refinery selling price reported in the report for that month was the amount 1.7437 shekels / liter (Gasoline 95), and the amount 1.8133 shekels / liter (diesel), which includes the refinery profit margin.

2- Logistical expenses: determined under the agreement between the Israeli and Palestinian parties, and as given in the report example, the logistical expenses are the amount 0.2010 shekels / liter (gasoline), and the amount 0.0450 shekels / liter (diesel).

3- The blu tax: determined by the Israeli "Ministry of Infrastructure," and according to the actual example for that month amounted to 3.0286 shekels / liter (gasoline), and 2.9017 shekels / liter (diesel).

4- The evaporation percentage: determined by the international standards authority, estimated at 5 per thousand, which in the example amounted to 0.0087 shekels / liter gasoline.

5- The price before applying value added tax amounted to 4.9646 shekels / liter (gasoline), and 4.7600 shekels / liter (diesel).

6- The value added tax rate, 17%, on the Israeli side, in accordance with the Paris Economic Agreement signed with the Palestinian side, amounted to 0.8440 shekels / liter (gasoline), and 0.8092 shekels / liter (diesel).

7- Thus the (total Authority price) is the amount 5.8086 shekels / liter (gasoline), and the amount 5.5692 shekels / liter (diesel)..(the selling price of the General Petroleum Authority) representing the Palestinian side.

· Calculation on the Palestinian side

8- The (total Authority price) in item number 7 above, after subtracting the price reduction decided by the Petroleum Council at the end of each month for the following month, of 0.06858 shekels / liter (gasoline), and the amount 0.1962 shekels / liter (diesel).

9- Thus the General Petroleum Authority price for the Palestinian trader becomes the amount 5.74 shekels / liter gasoline, and the amount 5.3730 shekels / liter (diesel).

10- Added to this price is the trader’s (fuel station) profit margin, which has been fixed by the General Petroleum Authority since 2004, at the amount 0.490 shekels / liter (gasoline), and the amount 0.300 shekels / liter (diesel).

11- The selling price to the Palestinian consumer becomes the amount 6.2300 shekels / liter (gasoline), and the amount 5.6730 shekels / liter (diesel)...

· The price of one liter of fuel in the example above progressed from one shekel and seven agorot and approximately one shekel and eight agorot at the Israeli oil refinery, passing through burdens and the blu tax, and the value added tax, to reach as shown above approximately 6.23 shekels for gasoline and 5.67 shekels for diesel, as the purchase cost to the General Petroleum Authority, or what is called the authority’s or the administration’s price.!

· The fuel price for the Palestinian consumer is set and circulated to stations to be complied with, and when determining the final price for the consumer, multiple factors are taken into account, including: the amount of monthly financial support intended to be provided to the Authority, depending on the government’s financial situation and the size of liquidity available in the treasury.

· As noted in the above example, the taxes imposed on fuels amounted to about 67% for gasoline, and 69% for diesel of the purchase price, which means that the taxes exceed by almost three times the purchase price of gasoline from the refinery, plus the refinery profit margin....!

· In general, taxes represent 68% of the total purchase price, which also means that rises or falls in fuel prices in Palestine will not correspond to their rises and falls in global markets for two reasons: first, there are approximately 68% taxes (blu and value added), which enter into the price components; and the second reason lies in the dollar exchange rate against the shekel, where there is an inverse relationship between oil prices and the dollar exchange rate, meaning that a rise in the US currency exchange rate absorbs a large part of the decrease in oil prices, and vice versa.!

· The taxes arising from the fuel sector in Palestine, in their two parts the blu tax and value added tax, form a primary source for the public treasury, reaching a monthly average value of 258 million shekels per month in 2017, equivalent to 35% of the clearance revenues received from Israel, while clearance revenues in turn constitute 68% of the net public revenues in Palestine in that year.! Where the treasury revenues from fuel tax in 2017 amounted to 2.903 shekels (two billion nine hundred and three million shekels approximately.!

- Annual consumption of fuels in Palestine according to the report is approximately one billion liters of fuel!

- The value of fuel purchases in Palestine is estimated at a rate of 80 million liters of fuel monthly, of which 25 million liters are gasoline, and 55 million liters diesel in addition to 14,000 tons of cooking gas, and other derivatives such as kerosene ..

· The Authority maintains a fuel stock that in most cases does not cover more than Palestinian needs for one day. The stock is estimated in Nalin at two million liters, of which one million liters gasoline, one million liters diesel, and 500 tons of gas.. and 50 thousand liters kerosene..!

· The amount of money the public treasury loses annually from fuel smuggling is estimated at 750 million shekels per year, which is 20% of the quantity of fuels present in Palestine in the year..!

· Date: 5-2-2021