Motorists have already faced increasing prices at the pumps due to events in the Middle East and the inflationary impact of the war is about to spread further. PrepayPower, with around 240,000 household customers, announced an increase in electricity and gas bills on Friday and the bigger players in the market are likely to follow before too long. The political temperature will rise as a result.
Brent crude oil prices, the industry benchmark, continue to trade in the $110 to $115 a barrel range, as traders watch the interactions between the US and Iran. Wholesale gas prices, vital for Irish electricity costs, also remain high, though still well below the levels they reached in 2022 following Russia’s invasion of Ukraine. The outlook remains unpredictable, but higher inflation and rising household energy bills are on the cards.
The Government has already responded through two rounds of measures, one to reduce fuel prices by cutting excise tax and the other to help sectors hit by higher diesel bills. Now it will come under pressure to do more. With a budget surplus estimated to be in excess of ¤9 billion this year, the Coalition has no shortage of cash. The question is how best to respond. The arrival of warmer weather may give it some leeway in terms of household energy bills, though this will be temporary, with Minister for Energy Darragh O’Brien indicating that sizeable enough increases are on the way.
A reintroduction of universal household energy supports is not warranted. Ireland is worse off because of higher wholesale energy costs and the Government cannot afford to compensate everybody. What it does need to do is protect less well-off households. A report from the Economic and Social Research Institute this week pointed out what could be achieved if support is focused, rather than universal.
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A Government taskforce is also looking at this issue and at wider questions on Ireland’s energy investment costs and how these are passed on to households and businesses. This is important work which needs to be given priority, even if wholesale prices do ease back in the weeks ahead.
Ireland has had fair warning about the State’s exposure to the potential volatility in the cost of imported fuel from both the aftermath of the invasion of Ukraine and now the Iran war.
Ireland lacks a credible strategy for the transition to renewable energy and a clear vision of what this means for household bills. Promises of cheap and clean renewable energy in the years ahead only go so far when household bills are rising. The latest crisis gives the Government an opportunity to promote a credible plan to the public. But it needs to come up with such a strategy first, with existing targets looking increasingly unrealistic and key questions about the transition to renewables still unanswered.
