Fuel cost on forecourts to stay high despite fall in crude price

The cost of fuel on Irish forecourts is unlikely to fall significantly in the run up to Christmas although prices for crude oil on international markets have slumped to four-year lows.

Oil now costs less than $80 (€64) a barrel - 30 per cent below a June peak - but Irish consumers will not see prices shifting much, according to the AA.

"I think the best consumers can hope for are small decreases because so much of the cost of the price of fuel here is tax," AA policy director Conor Faughnan said.

Crude oil prices are in a downward spiral due to falling demand and increasing supply.

In the short term, the trend seems set to continue, with some experts predicting prices could fall to as low as $65 (€62) a barrel early in the new year.

“A tax free litre of petrol costs less than 60 cent,” said Mr Faughnan. “With so much of the retail price make up of tax, we see far less movement than in the US where tax on fuel is very low.”

In the US retail markets more closely match investment markets. The national average price for petrol there is just 62 cent a litre, according to the US Energy Information Administration, 12 cent cheaper than it was a year ago.

Mr Faughnan said the AA had been tracking fuel prices for more than 40 years and had never seen “any evidence of price fixing”.

Around 90 cent of a litre of fuel goes to the tax man while retailers get about four cent.

Wholesalers and distributors share eight cent between them, leaving little more than 50 cent per litre to cover the cost of extraction, refining and transportation.

The excise duty of fuel is levied on a per-litre basis and not as a percentage of the price, which means when the cost falls, the tax remains at the same level.

VAT is charged at 23 per cent of the non-tax fuel price and does fall in line with other price falls.

If a car does 12,000 miles a year and uses 150 litres of petrol a month, the impact of increases in the duty on fuel by the current Government amounts to in excess of €360 a year.

A weaker euro has also kept prices here higher than they might otherwise have been.

“The good news is that there have been moderate falls in prices at the pumps and our next survey, which will be published next week, is likely to show the average price of a litre of petrol at less than €1.50,” Mr Faughnan said.