Petrol prices steady in recent weeks, but hikes are looming, AA warns

The price of fuel on Irish forecourts has remained steady in recent weeks but the ongoing war in Ukraine and Government plans to remove an excise duty reduction on both petrol and diesel next month ahead could see prices rise sharply in the weeks ahead, the AA has warned.

Its latest pricing survey puts the average price of a litre of petrol at €1.61 while a litre of diesel is priced at 10 cent more. According to the AA, the price of petrol is just 0.6 per cent higher than it was last month while diesel has fallen in price by 1.7 per cent in recent weeks.

However, it warned that the steadying of prices comes in advance of an EU-wide ban on the importation of Russian oil products, which comes into effect from February 5th, which could lead to price increases.

The Government is also due to end a reduction on duty on petrol and diesel at the end of February which could see the price of a litre of fuel climb by between 15 and 20 cent.

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Before it invaded Ukraine, Russia was Europe’s largest external fuel supplier, and the EU has continued to buy in significant volumes up to the cut-off. Subsequently, the sanctions are likely to see a great rerouting of global diesel – with Russia’s new crude buyers most likely sending fuel back to Europe.

“Europe has been raising its diesel imports from Asia and the Middle East; the two regions are now expected to shoulder most of its exports after the ban comes into place,” said AA Ireland’s Head of Communications, Paddy Comyn.

“The longer freight distances, however, and higher demand for tankers shipping the fuel into Europe have meant that freight rates are rising, potentially adding to the cost for consumers at the pumps. In the short term, there’s a risk of higher prices,” he continued.

Pointing to the proposed ending of the excise duty reduction on petrol and diesel at the end of February, he said that would increase fuel prices by 15 cents per litre for diesel and 20 cents per litre for petrol.

He suggested that the increase be staggered to avoid difficulties at fuel stations.

“Suddenly switching off the excise duty reductions overnight will inevitably lead to anxiety leading up to the end of February, which could lead to tailbacks filling stations or pumps running dry in certain areas,” Mr Comyn said.

“A more prudent approach would be to stagger this over two to three months. There remains uncertainty because of the Ukraine conflict and the EU’s imminent ban on Russian oil products, particularly diesel, so a staggered reduction in duty could offer a buffer to any potential increases,” he concluded.