THE PRICE OF petrol and diesel has climbed to its highest level in decades, heaping further pressure on hard-hit households and businesses that are struggling with the spiralling cost-of-living.
In its latest car fuel price analysis at the end of January, AA Ireland noted that pump prices have reached their highest point since the company started its surveys in 1991.
The survey found that the average retail price of petrol was a Euro and 75.5 cent per litre, while diesel was a Euro and 66.1 cent per litre.
This amounts to an increase of three cent per litre for petrol and over four cent per litre for diesel, compared to when the survey was conducted at the end of December.
Every litre of petrol was found to cost 42 cent more than the same time last year and every litre of diesel is 45 cent dearer.
So, what’s behind the alarming leap?
Leaving aside the wider phenomenon of inflation on the Euro’s purchasing power, the most significant cause is the recent global spike in the price of oil.
Car fuel prices have increased in lock step with global oil market prices, which have jumped, from about $55 (€48.20) a barrel this time last year, to over $90 (€78.85) a barrel in the past week.
The main factors contributing to the jump are the sudden rise in demand for energy in recent weeks – with many countries relaxing Covid restrictions – and uncertainty over energy supplies because of the tense situation in Ukraine.
The price of Brent crude this week is the highest it has been since October 2014, a fact that is likely to result in further price increases at the pumps.
Besides geopolitical uncertainties, analysts have noted that OPEC+ – a group of 23 of the world’s major oil exporting nations – are struggling to meet targets to lift output by 400,000 barrels a day, adding to the upward pressure on prices.
In December, the total volume of OPEC+ output increased by only 90,000 barrels per day, far short of the 400,000 target, according to a survey by the Bloomberg news agency.
Bjarne Schieldrop, chief commodities analyst at SEB in Oslo, noted that in a recent meeting of OPEC+ countries, Saudi Arabia “made it clear that they will not step up production beyond their cap to cover losses by other members”.
Had the gulf kingdom – which is OPEC’s largest producer by far– decided to raise its cap and increase production it would have eased the pressure on prices due to more oil being available on the market.
Many analysts expect the grouping to decide to continue to boost output by 400,000 barrels per day in March.
This would be in line with their strategy to slowly re-open the taps since May last year, after drastic cuts to curb slumping prices when the coronavirus pandemic began.
The government’s share
However, the price surge has also drawn attention to the significant tax take that the State collects from every litre of petrol or diesel sold.
Retailers are quick to point the finger of blame at the government, arguing that the State garners the majority of revenue generated by fuel sales.
Fuel prices have already provoked protests from hauliers and farmers in recent months, with calls for lower taxes proving a popular rallying cry among groups who took to the streets of Dublin before Christmas.
The Irish Petrol Retailers Association claims that, following recent carbon tax increases, almost 65% of the pump price of petrol and diesel goes to the government.
The representative body says that 30% is collected by crude oil distribution companies and that retailers are left with only 5%.
AA figures appear to back this up, with the motor group saying that 60% of pump prices are due to tax, including VAT and carbon tax.
While average pump prices for petrol and diesel currently stand at €1 and 75.5 cent and €1 and 66.1 cent respectively, the price of each type before taxes are 77.9 cent and 81.1 cent respectively.
AA spokesperson Paddy Comyn beleives the government needs to make concessions on petrol and diesel prices as a result.
Comyn says lower income families and people in rural areas, where transport links are poorer or non-existent, are disproportionately affected by rising transport costs.
“People are seeing the pinch because of lots of other factors, but at some stage, something has to give,” he says.
It’s getting too much for the average person and it’s the lower income families who are really struggling on this.
“They are not being given any concession. It’s great to have all these EVs (electric vehicles): there are grants for them, but they are grants for people who can well afford them.”
Comyn adds that the government likely wants to steer clear of any measure that could incentivise fossil fuel consumption, but says that a fuel cap introduced in Hungary did not result in a significant increase in vehicle use, according to the country’s tax authority.
“The barrel of oil will always fluctuate, but at least if we knew that there was temporarily – I underline temporarily – an upper limit, that would at least relieve some of the pressure,” he says.
“Because we’re now headed towards a situation of €2 a litre for petrol and that’s going to hurt a lot of very low income families.”
The Consumer Association of Ireland agrees that it’s an oversimplification to lay the blame for the spiking prices at the foot of global supply.
CAI spokesman Dermott Jewell says Irish motorists suffer due to a lack of competition in pricing at fuel pumps and a limited degree of choice in retail providers:
Together these determine that ‘shopping around’ is not a worthwhile option.
“The higher the price, the more the return of tax to the exchequer. This is why there has been, and remains to be, a sustained call upon government to review its percentage of tax taken in fuel.”
Jewell says that price increases in transportation are not absorbed by retailers but are passed on to the consumer in the cost of goods and services that they purchase.
On the flip side, he noted that consumers have also largely seen no benefit from tax breaks for industries – such as when the value added tax (VAT) rate was reduced to support the hospitality sector – as prices have failed to fall.
“Prices, once increased, rarely drop to any significant degree,” Jewell adds.
Discontent looks set to heighten as oil prices appear destined to breach the $100 a barrel milestone.
However, the government currently maintains it is powerless to act. Taoiseach Micheál Martin reiterated the commitment to carbon tax increases yesterday, saying the government must “deal with climate change once and for all”.
While last November, Martin argued that European Union rules prevent them from cutting VAT rates on fuel.
Additional reporting from AFP © – AFP, 2022
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