Rising oil prices, which touched a 20-year high last week, will hit consumers hard. Barring a quick - and unlikely - reversal, motorists can expect the increases to filter through to garage forecourts in the short term while airlines will move swiftly to add a fuel surcharge to ticket charges.
Against this background, pressure will be piled on the Organisation of Petroleum Exporting Countries (OPEC) this week to increase oil production in an attempt to ease prices or, at the very least, to ensure they stop climbing. Attention will focus on Ali al-Naimi, Saudi Arabia's oil minister because, of OPEC's 11 members, only Saudi Arabia is not producing at maximum capacity and could increase its supply. It is only a week since OPEC agreed to boost output by half a million barrels a day to 28 million. Now another increase of half a million barrels is on the cards.
OPEC claims - with some justification - that there is no shortage of supply but that the problem is refining capacity. Another factor is that much of the oils being made available by OPEC are heavy, sulphurous grades which are less in demand, mainly because they are expensive to process. The demand in the market is for greater supplies of cleaner diesel fuels and low-sulphur petrol.
The Centre for Global Energy Studies says that OPEC has lost credibility as a guarantor of stable oil prices. Mr al-Naimi said last March that oil prices would remain between $30 and $40 a barrel for the remainder of this year. He was noticeably quiet last week when it touched the $60 mark. The price increase will generate substantial extra funds for OPEC members but they will be concerned that high oil prices could reduce world economic activity and ultimately demand for oil.
Oil prices are higher than the supply-demand situation suggests they should be. There is nervousness in the market that future supplies will not grow at a rate which will satisfy demand. China, the world's second-largest oil consumer, increased its consumption by 15 per cent last year. There is far too little capacity to increase oil supplies by 15 per cent and the half-hearted emphasis on conservation and alternative energy in the developed world will not make a sufficient difference.
Ireland must accept that the days of cheap oil are over and that unless alternative energy possibilities are pursued with vigour, our dependence on price-sensitive oil products will increase. Green taxes would help to curb consumption but the Government, to its shame, backed down on the proposal for a carbon tax. In the national interest, this issue should be revisited.