The Irish inflation rate was expected to jump in March following the rise in energy costs, but the 3.6 per cent annual figure was higher than expectations. Energy prices rose more than 11 per cent in one month. The Government excise tax reductions, which reduced prices at the pumps, happened after the Central Statistics Office (CSO) took its sample figures. However, the extent of the inflationary threat is now clearly evident.
As the war drags on, the likelihood of the rise in the inflation rate being some kind of temporary blip recedes, even if a surge similar to 2022 is not –yet – in prospect. There are also concerns about the impact on world supply, if the crisis persists.
Energy security relates to two separate but related issues –supply and price – and there will now be concerns about both. A further surge in wholesale oil prices remains possible and if gas prices remain elevated there will be concerns about electricity costs too.
The latest inflation figures should be seen as a clear warning to the Coalition. As an economy reliant on imported oil and – apart from the declining Corrib field – gas, Ireland is exposed, as was evident from the initial surge in prices after the crisis hit. The rise in the use of renewables, particularly onshore wind, is welcome, but offshore wind remains years behind target and while new interconnections with Europe help, the State has been slow to build resilience in this area. A viable gas storage facility may still be some years away.
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There is much for the Government to do. While there is no price control in Ireland, the conclusions of a report from the Competition and Consumer Protection Commission (CCPC) on price rises here immediately after the crisis hit should be informative. Was there price gouging in parts of the market, or did Ireland’s reliance on imports leave the State particularly exposed?
Serious analysis is needed on the best way to support less well-off households if the crisis does deepen. After the Russian invasion of Ukraine, the previous government introduced energy credits for all homes. This time around supports need to be more focused; the welfare system gives one route, though assisting those who are at work but on lower incomes is a challenge. Demand management may also be an issue – through, for example, measures to encourage people to use public transport, or work more from home.
The longer-term issues Ireland faces on energy security are also again underlined. The State remains too exposed to imported fossil fuels and realistically will continue to rely on gas for many years to come. The upgrading of the electricity grid and the development of offshore wind have become mired in delay.
If ever there was a time to reboot Ireland’s commitment to renewables and give delivery of this agenda a new impetus, it is surely now.
