Petrol prices are heading for €1.20 a litre as oil prices hit new highs. Consumers could also face rising prices elsewhere as record crude prices affect company costs, write Barry O'Halloran and Meg Sheeve
Oil broke the $70-a-barrel mark and previous records on international markets yesterday. In London, Brent crude closed at $72.29 after trading at a high of $72.34. In New York, US light crude was selling for $71.35.
Oil firm Esso responded immediately by raising prices for its premium unleaded petrol by two cents a litre at its 40 sites in the Republic. It now sells for 111.9 cents and 114.9 cents a litre, depending on the location of its forecourts. Before the increase, Esso's average charge was €1.09 a litre.
Esso said that since February, international market prices for petrol and diesel had jumped 31 per cent or more than $160 a tonne. Experts believe that other companies will follow suit.
Growing tension between the US and Iran, the world's fourth-biggest oil producer, over the Middle Eastern country's nuclear programme, is driving up prices.
"The current shoot-up we are experiencing is as a result of the Iran problems and it's not helped by the flare-up between Israel and the Palestinians," Opec president and Nigerian oil minister Edmund Daukoru said, "but mainly it's the threatening statements being made against Iran as a result of its nuclear programme."
Nigerian output is also a major concern. An uprising in the country's delta region, which produces 500,000 barrels a day, has shut down its refineries.
Oil prices have soared from $20 at the start of 2002 and are nearing the inflation-adjusted peaks of more than $80 which they reached in 1980, the year after the Iranian revolution. At the same time, the summer driving season begins in the US next month. This will fuel demand in the world's biggest consumer of oil and petroleum products.
The increase threatens to have a more general effect on Irish consumers. Fuel accounts for 25 per cent of the cost of electricity production and the ESB is expected next month to demand that the Government allow it to increase charges above the rate of inflation to counter the impact of increased oil prices.
Taxi drivers have already stated their intention to seek a special surcharge on fares. National Taxi Drivers Union president Tommy Gorman said its members had decided to ask the taxi regulator today for the go-ahead to charge passengers an extra 50 cents a journey until petrol prices retreated from current levels.
The Irish Road Haulage Association called on the Government to cut duty on diesel. Spokesman Jimmy Quinn said the State took €367 every time a truck filled its tank. "Under EU rules, the Government can cut that to €302, so there's €65 that's available there straight away," he said.
Goodbody Stockbrokers economist Dermot O'Leary warned that if crude prices remained at current levels, consumers could find themselves paying up to €1.20 a litre for petrol.
Paul Harris, head of energy and emissions at Bank of Ireland global markets, said prices tended to rise by four to five cents a litre for every $5 a barrel increase in crude oil prices. Mr Harris said that if current trends continued, crude prices could reach $75 a barrel. "In that case, you are looking at petrol prices of €1.15 to €1.18 a litre," he said.
A spokesman for Statoil argued that there was no direct correlation between crude oil prices and what motorists pay at the pump.
Ulster Bank economist Niall Dunne said he did not see current trends in the crude oil market reversing in the near future. "We are looking at €1.15 a litre if the full price is passed on," he said. However, he added that a strengthening of the euro against the dollar would ease the impact of crude prices, as it is traded in US dollars.
British Airways yesterday said it would again increase its fuel surcharges by £10 on round-trip longhaul flights to £70. Ryanair, which has guaranteed not to introduce surcharges regardless of the price of fuel, reiterated its position, while Aer Lingus made no comment.