The cost of a litre of petrol and diesel could soon cross the €2 barrier again as rises in excise duty, a spike in demand and a reduction in the global supply of oil creates a “perfect storm”, AA Ireland has said.
While the average cost of motor fuel stands at around €1.70 a litre at present, there will be a price jump after Friday when the excise duty on a litre of petrol and diesel will climb by 7 cent and 5 cent respectively as a measure introduced last year to help consumers during the cost of living crisis nears to an end.
Minister for Finance Michael McGrath on Tuesday said this increase was “locked in” but that a final planned increase to the tax, which would bring it back to its original level from the end of October, would be kept under review as the Government prepares the budget package. This would add 6 cent a litre to the price of diesel and 8 cent for petrol.
Mr McGrath said that when excise was reduced “it took a while for that to feed through to the prices at the forecourts, the same should apply when excise is being increased”. He said the Coalition would “be monitoring what the retail prices are over the coming weeks in that regard” before making a decision.
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However, he noted that the amount of excise duty lost to the exchequer since the measures was introduced last year had amounted to almost €1 billion in the period to the end of June.
Paddy Comyn of AA Ireland said the big question looming now was whether we will “see fuel at more than €2 a litre again”.
“Obviously we hope not but at the moment it seems likely given multiple factors including the rise in excise duty,” he said.
He pointed out that the price of crude oil on global markets has been steadily climbing in recent weeks. “It has gone up to around US$85 a barrel and while that is some way off the US$100 a barrel it was at the height of the crisis last year, it is higher than it was.”
Mr Comyn said a reduction in the amount of oil being product by Organisation of the Petroleum Exporting Countries (Opec) members as well as an ongoing spike in demand for fuel across the world were behind the climbing prices.
“When you combine higher demand with Opec not producing as much as they should with the excise duty increase closer to home we are looking at a perfect storm for climbing prices,” he said. “What was a soft enough spring and summer when it came to fuel prices might turn into a gloomier winter.”
