Madam, - More heat than light has been shed by much of the public debate on diesel prices and in particular by recent comments on the price difference between petrol and diesel.
Traditionally, diesel was always slightly cheaper than petrol on Irish forecourts. Customs duty rates were lower on diesel, international prices for both products were normally within the same range and European production was closely matched to demand for both products.
This has changed. The price of diesel coming into the country has risen by more than 75 per cent in the past year, compared with less than 20 per cent for petrol. This is because the global demand for diesel is growing and global supply is falling behind demand. Inevitably this leads to increased prices.
The average barrel of oil can only produce so much diesel. European and Asian diesel demand has far outgrown that production. Our latest estimate is that Europe imports 25 million tonnes of diesel a year, mainly from Russia.
In addition, the increased demand for aviation fuel has had a limiting effect on diesel production. As the demand for petrol remains closer to what Europe refines, the upward pressure on petrol prices is less than that on diesel.
The oil industry in Ireland supports the Government's environmental policies but we see the changes to Vehicle Registration Tax tending to widen the current differential between diesel and petrol. This exacerbates the current situation by raising the demand for diesel.
Pan-European political policy continues to promote the further use of diesel and so demand for it will continue to increase and it will become more difficult to source. This will inevitably bring more pressure on prices.
European and Irish policies should take account of this. -
Yours, etc,
MICHAEL FORDE,
Secretary,
Irish Petroleum Industry Association,
Custom House Plaza,
IFSC,
Dublin 1.