Why are oil and fuel prices at record highs? - WLR FM

Image audioImage Why are oil and fuel prices at record highs? - WLR FM

As the cost of petrol and diesel hits 2 per litre in Ireland, Head of Communications at bonkers.ie, Daragh Cassidy speaks on WLR FM about the rising living costs in Ireland and how the sanctions on Russia could impact us. He discusses Ireland’s reliance on energy and how the Government could help alleviate the pressure felt on Irish people’s pockets. 

The rising cost of energy 

Unfortunately, the increasing costs of oil and fuel in Ireland do not look like they’re going to get better in the short or medium term. Both oil and gas are at almost record highs in the International market today. With the price of gas up 13 fold in comparison to its cost a year and a half ago.

In Ireland, we use gas to generate a lot of our electricity and therefore when gas goes up in price electricity costs also rise.

Coinciding with this, energy is used to produce a variety of things in this country. For instance, this is seen in the food sector. If energy prices increase that then feeds through into food inflation because, for example, fertiliser is produced using gas.

However, it is not just energy prices that are increasing, when you look at the current figure for inflation, it is up at 5-6%. It appears this figure will only get worse in the coming weeks.

Is there a threat to fuel supplies?

At the moment, no but it depends on how the sanctions against Russia go. We don’t have huge direct exposure to Russia as most of our natural gas comes from our own fields. The rest of the gas we get comes from the UK, who in turn buy their gas from the gas fields in Norway.

However, Europe as a whole imports 40% of its natural gas and 30% of its oil from Russia. This translates to the continent buying a billion euros a day in energy from Russia.

If Europe were to agree to stop buying oil and gas from Russia then these European countries would have to find other places to purchase their energy from. This could result in oil and gas shortages as these countries begin scrambling to find new suppliers. This could lead to large increases in the gas and oil prices in Ireland as these European countries may start buying off our suppliers.

This potential decision to stop buying coal, oil, and gas from Russia is what will have the biggest impact on price in Ireland, as well as Europe.

Is there a threat to food supplies?

I don’t believe there will be food shortages but prices will definitely go up.

You may not see your favourite brand of rice or cereal as much as you used to but I think that will be ok in that sense.

It's more just the price of goods, particularly grocery goods and food. Transport will also be affected.

Would reducing excise tax help the fuel price situation in Ireland?

It's something the government could do quite easily. Once diesel and petrol begin to go above 2 a litre, that really hits people badly in the pocket.

Oftentimes those conversations around public transport and electric cars are very Dublin focused or big-city focused. While those in rural areas don’t have a lot of options when it comes to public transport. They have to take the car. So when you start seeing petrol and diesel at the levels that they’re at, then you have to wonder what the government can do.

The Government takes slightly more than 55% in tax from every litre of petrol. Therefore, if petrol is at 2 a litre, the government is getting just over 1 of that in the form of tax.

We have of course the energy credit for gas and electricity which is due to come in now. However, it is a few weeks late so some people won’t be receiving it until May or June.

I think for the next Budget the Government will need to look at that, by maybe having another energy credit or reducing VAT on gas and electricity.

VAT currently rests at 13.5% for gas and electricity which isn’t the highest rate of VAT compared to other European countries. However,  seeing the Government was able to reduce the rate of VAT to 9% for tourism and hospitality, I don’t see why it would not be possible to reduce the rate of VAT on gas and electricity.

Cut the cost of your energy bills 

With the cost of energy bills only expected to rise in the coming months, you want to make sure you are saving as much as possible on your gas and electricity bills.

Head over to our gas and electricity comparison page to discover the best value energy deals on the market so you can start saving today.

But why stop there? Bonkers.ie offers a range of different comparison tools that will help you lower the costs of the broadband, banking and insurance products you use.

Get in touch?

Have you noticed an increase in prices across oil and gas? If so, let us know today. You can contact us on Facebook, Instagram, and Twitter.