Motor fuel could top €2.60 per litre next month, oil firm boss warns

The price of a litre of fuel on Irish forecourts could top €2.60 by the end of next month if current volatility on global markets continues, the head of an Irish fossil fuel exploration company has forecast.

Each rise of 10 cent a litre adds €120 to the annual cost of keeping the average car on the road so such a price hike would see the yearly fuel cost for the typical Irish motorist increasing by more than €500.

This would come on top of increases of close to €1,000 already faced by many Irish motorists.

"Retail petrol and diesel prices usually lag by up to six weeks," said David Horgan, the chairman of Petrel Resources.

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In February Mr Horgan correctly predicted that fuel prices on Irish forecourts would reach €2 a litre and he is now predicting that based on current crude oil prices and assuming no tax or foreign exchange changes, a litre of fuel could climb to as much as €2.64 before the end of April.

Further fuel price increases would wipe out the Government’s tax cut of 15-20 cent per litre which was rolled out last week, although much will depend on the price of crude oil in the weeks ahead.

“The crude oil price soared to $133 [for a barrel on March 8th] but corrected next day to around $110 and has traded in a tight range since,” Mr Horgan said.

However he said that by looking at future oil prices, a “war premium” in the region of €20 a barrel was anticipated.

“Normally it takes five to six weeks for crude prices to work their way through to the forecourt though many stations seemed to move much quicker this time. But on January 31st, the Brent oil price was $89, which is well below today’s $113 – suggesting that more increases should feed through.”

Optimistic

AA Ireland spokesman Paddy Comyn is more optimistic about prices in the short term. He said prices had fallen to an average of €1.81 for diesel and €1.73 for petrol over the weekend.

"We are seeing nothing close to the €2 mark," Mr Comyn said. "Things have sort of settled, the oil price is quite low as reassurances about supply from sources other than Russia have come through and it looks like some of the reductions have kicked in."

He added that based on “that sort of trajectory, the throbbing sore is settling but that does not mean prices won’t be volatile in the weeks ahead”.

Mr Horgan pointed out that a “major beneficiary of higher prices is the exchequer due to the 23 per vent VAT rate – which is a tax on excise duties, levies and carbon taxes, as well as on the cost of the fuel itself”.

He suggested that the recent excise cut “though welcome for motorists . . . is political theatre, handing back VAT and carbon tax gains of recent months. The State takes with one hand and returns with the other. They do not resolve the underlying problem”.

Amid concern over fuel cost fluctuations, a €125 once-off fuel allowance payment will be paid to 372,000 households from Monday, Minister for Social Protection Heather Humphreys has said.

The payment comes on top of regular fuel allowance, agreed as part of the Government’s €505 million package aimed at mitigating the effects of rising energy costs. Households will receive the payment in their bank account this week, depending on their particular social welfare scheme.