Are fuel prices about to soar again?

The average cost of a tank of motor fuel will jump by more than €10, with a litre of diesel set to come close to €2 again, if the excise relief on petrol and diesel introduced last spring is scrapped as planned at the end of next month.

The move under consideration from the Government will see the annual cost of motoring for a typical Irish driver climb by more than €200 and put forecourts under pressure in the run up to the end of February if, as is feared, people seek to protect themselves against the excise hike by filling up tanks before the changes come into effect.

According to the latest pricing survey from the AA, the average price of a litre of petrol is €1.61 while a litre of diesel is priced at 10 cent more. If the excise cut is removed, then the average price of a litre of diesel will climb to €1.86 while a litre of petrol will have an average price of five cent less.

There is likely to be further pressure on diesel prices, in particular with the implementation of an European Union-wide ban on the importation of Russian oil products, which comes into effect from February 5th.

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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.

The AA’s Paddy Comyn said longer freight distances 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.”

While little can be done at a local level to offset the impact of the ban on Russian oil on prices on forecourts, Mr Comyn has called on the Government to avoid a cliff edge when ending the excise cut on motor fuel.

“I’m not sure it’s been thought through. There’s lots of discussions about election posters and donations and all sorts but I don’t know whether they’ve been focusing on this issue,” he said.

He said that if the excise had to increase, the increase should be “staggered” to avoid panic buying before the end of next month.

He said if the restoration of the full rate of excise is imposed in one go “it will be just a huge, huge increase and if the public react to that you could see queues form and it doesn’t take a lot, I believe, to empty a petrol station”.

Speaking in the Dáil last week, Minister for the Environment Eamon Ryan signalled the Government may end its cut on fuel excise duty in the coming weeks. He said the price of oil seemed relatively steady and “in those circumstances we do have to look at restoring our tax base”.

In response to queries from The Irish Times about plans for the excise duty on motor fuel, a spokeswoman for the Minister for Finance Michael McGrath refused to be drawn on how and when the full rate would be reintroduced.

The spokeswoman said “a number of cost of living tax measures are due to expire at the end of February” with the Minister for Finance set to consult the leaders of Fine Gael, Fianna Fáil and the Green Party as well as the Cabinet “shortly, regarding the future of these measures”.