Irish motorists could be facing “unwelcome” fuel price increases due to sanctions placed on Russia over its military incursion in Ukraine, a leading oil company has warned.
Following weeks of tension and diplomatic talks, Russian president Vladimir Putin moved to recognise separatist-held enclaves of Donetsk and Luhansk in eastern Ukraine and send military forces to secure the areas.
The European Union responded by placing sanctions on Russia’s central bank and members of the country’s State Duma. And there is an expectation of additional penalties if Moscow takes further military action in Ukraine.
The escalating crisis and potential for further retaliatory sanctions placed on Russia – a big oil and natural gas supplier to Europe – is expected to push up the price of fuel and gas.
Maxol chief executive Brian Donaldson said the demand for fuel is already growing, at a time of "restrictions on supply" due to the Covid-19 pandemic.
On Tuesday the price of crude oil approached $100 a barrel, a benchmark considered a sign of escalating prices by the industry.
Advancing prices are “reflecting concerns” around the deepening crisis in Ukraine. And they are likely to exert further price “pressure” on service stations and motorists, said Mr Donaldson.
“All we can say is it looks like there will be further pressure on prices. That’s not good news for anybody,” he said. The pressure on prices comes at a time when inflation is already running high, he added.
Motorists are “less likely to fill up their tanks” at the moment, due to high prices, with customers buying less and “probably making less journeys”, said Mr Donaldson.
It is impossible to tell how much the increase might be until events unfold, he said. There is a 10 day lag in crude oil price increases reflected in the cost of fuel at the pump, he added.
Fuels for Ireland chief executive Kevin McPartland said motorists would likely be facing increases in coming weeks.
About 10 per cent of the world’s oil comes from Russia, as well as a significant amount of natural gas, he noted. “A drop in supply and growth in demand, Junior Cert economics will tell you that will drive up prices,” he said.
The potential development would come “at a time when prices are already at record highs” due to supply problems, he added.
Paul Deane, a research fellow in energy in University College Cork, said while the expectation would be home heating and electricity bills would "soften" coming out of the winter, prices would now likely remain high due to the crisis in Ukraine.
A “fear premium” exists in the global gas market at present, which would keep prices high for the coming weeks, and longer in the event of a major conflict in Ukraine, he said.
“We’re not going to see shortages in Ireland, but we will see sustained gas prices,” said Mr Deane.
For consumers, that would mean “sustained high electricity prices” and elevated home heating bills, he said.