There are many factors behind the recent rise in fuel prices – but none of them show signs of easing in the months ahead, writes Adam Maguire.
In the space of a month average fuel prices have risen by 10-13.5%, according to AA Ireland, in no small part due to the latest phase of the Government's excise duty restoration.
There’s a bit of a lag in the market price for oil and the forecourt price for fuel - because what’s bought today can take a few weeks, or even months, to make its way through the chain until it gets to our road side. Of course you need to ship the fuel and, from Covid all the way through to recent attacks on ships in the Red Sea, there has been a lot of disruption to global shipping lines.A lot of this oil is coming from the Middle East, too, so when you have conflict or rising tensions in the region, as we’ve had over the past eight months with Israel in Gaza, that can impact the price.
That seems relatively straight-forward for buyers – they simply have to stop buying from Russian companies. But it’s not that simple. It’s possible they were even doing this without realising, but it would still be a breach of sanctions. It’s currently charged at €56 per tonne of Co2, but the carbon emitted by petrol and diesel doesn’t change, so you can work it out on a per litre basis from that.The money raised from that is largely meant to go to environmental and sustainable measures - like helping homes and businesses to decarbonise, helping farmers to become more sustainable and so on.
Yes - and it’s important we mention this last, because for all of the figures that I mention for the different levies and duties, VAT of 23% is then added on top of that. Instead, operators say the fuel is a way to draw in consumers who, they hope, will then buy items with a higher margin. That’s the final part of the gradual restoration of fuel excise duties, which were of course cut in the wake of Russia’s invasion of Ukraine.
The legislation currently allows for a gradual increase in this tax each year, until it gets to €100 per tonne of Co2. The NORA rate is set to stay the same - but the Better Energy Charge is expected to go up slightly - from 0.8C to 1.3c per litre. But even putting all of that aside, it’s unlikely we’ll see a price fall because oil is a particularly irrational market - it doesn’t adhere to the same supply and demand that you’d expect.This is in large part down to the oil production cartel OPEC - which has 12 members including Saudi Arabia, Iraq, Iran and the United Arab Emirates.
And that’s the important thing here - because OPEC will meet every two months, look at the market conditions, and agree on how much oil each country will produce each day. That was because shale is more expensive to make, and they hoped if they put up with lower profits for a while, they’d put the US upstarts out of business, and maintain their level of market control.
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