OIL PRICES HAVE gone through the floor as the cartel of major producers effectively lost control of the market for the commodity.
Falling costs have already driven the average cost at the pump in Ireland to near five-year lows for diesel in November, with prices likely to plunge further as the benefits from cheaper crude filter down the pipeline.
The price of Brent oil, which is used to benchmark most of Europe’s supplies, dipped below $40 per barrel today – a near seven-year low - about half what it was fetching at the same time in 2014.
The latest plunge came as the Opec consortium, which includes Saudi Arabia and 12 other major oil producers, decided to maintain supply levels despite a worldwide supply glut.
On Friday the group refused to agree to a production ceiling with two members, Iran and Iraq, actually pledging to increase their exports next year. Opec countries are already producing an estimated 32 million barrels per day, 2 million above the group’s earlier target.
Global stockpiles of the commodity are also at record highs after years of weak demand and an increase in output, particularly from shale oil producers in the US, which isn’t part of the Opec cartel.
Analysts had been predicting prices would rise again as producers cut supply, but neither that reduction nor an increase in consumption has materialised.
Pump relief
Meanwhile the retail prices of fuel in Ireland have been following the oil price down since the middle of the year, according to the latest figures from AA Ireland.
In November the average price of diesel was €1.19 per litre, compared to €1.33 in May and a high of nearly €1.48 in mid-2014.
The average price of unleaded was €1.31, down from €1.45 in July and €1.57 last year.
However there’s a limit to how closely the pump price can mirror the drop in crude costs as the largest retail component goes to the Exchequer in the flat excise tax. As it stands, between 60% and 70% of the total retail price is made up of VAT and excise duty.
- With AFP
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