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Ireland ‘not in a position’ to place a cap on fuel prices

By March 10, 2022No Comments

Minister for Finance Paschal Donohoe has said Ireland is not in a position to place a cap on rising fuel prices, as it is a country that must buy the majority of its own fuel.

Asked about the prospect of price regulation – which has been called for by the Opposition and touted by the EU yesterday – Mr Donohoe said it remained to be seen how that would be implemented for countries who by-and-large import most of their fuel, which was the case for Ireland.

“We’re not in the situation where we have access to the majority of our fuel needs from our own sources. That means the relationship that we have with external supply is very important.

“For that reason, we’re not in a position to be able to give a commitment in relation to putting a cap on the price of fuel.”

“For a country that has to buy most of its own fuel, I currently don’t see any way that a price cap could be implemented, that wouldn’t either cause further economic difficulties or would cause an issue with the supplier”.

It comes after the Government announced a cut in excise duty on petrol and diesel.

The reduction will be 20 cent per litre on petrol and 15 cent per litre on diesel. A cut of 2 cent per litre on green diesel has been agreed.

The reduction will be in place until 31 August and will cost €320 million.

Tonight, the Dáil voted in favour of the cut in excise on petrol and diesel.

Minister Donohoe said that this measure will reduce the cost of a 60-litre tank of petrol by €12 and 60-litre tank of diesel by €9.

Speaking on RTÉ’s Six One News, Mr Donohoe said he understood that many people believed more is needed, but added this was an important intervention.

“No government is in a position to insulate all of us from the kind of pressures and changes that are happening across the world,” he added.

“We know this is an additional cost for many, we know how hard it is. We want to be open and honest and recognise that with everything that is going on, we’re not going to be able to insulate ourselves from the rising costs that are going on, but we can help with them, and that’s what we are looking to do with reduction that the Dáil should pass tonight,” he said.

Asked if the hit to excise duty would be offset by VAT on higher oil prices, Mr Donohoe said: “…we’re going to see all other kinds of economic effects taking place in Ireland and across the world, which will have an affect on other taxes I was planning to collect.

“So yes, you may see a change in the tax that we collect on fuel, but unfortunately, I think you’re going to see a lot of other changes in our economy that will balance that out.

This evening Taoiseach Micheál Martin told a Fine Gael meeting that the Government is engaging with the European Commission on the issue of possible further energy price changes.

Earlier, Mr Martin said the Government had now set aside more than €800m extra to respond to rising energy prices.

He told the Dáil that excise cuts the Government has announced “will cost €320m on top of the €550m package” announced a month ago.

“We don’t envisage rationing of oil and petrol”, Mr Martin said.

He added that “price caps in themselves can’t work” on an internationally-traded product. “We are price-takers, clearly”, he said.

“There’s an energy crisis now in terms of supply and in terms of prices”, he said, and “the other key area will be food”.

He pointed out that the Consumer and Competition Authority is there to prevent price-gouging.

Global factors have caused the price increases in gas and oil and the impact of the war in Ukraine has been stark, he said.

The Taoiseach said the Government is working with other EU countries to see if a further cut was possible for excise on diesel as it is currently prevented from doing so under EU rules.

Minister for the Environment Eamon Ryan said that the best way for Europe to reduce its dependence on Russia is to switch to renewable energy sources.

This evening, Mr Ryan defended the Government’s cut in excise duty, saying that “while it won’t cover everything, it will make a difference”.

Speaking on RTÉ’s Drivetime, he said the Government would not be able to protect people from a “dramatic” increase in prices, but that the cut “will help”.

“We did go to the max as to what we could do within EU directives, and we did want to do something quickly because things are changing by the day,” he said.

Amid warnings to Government about the economic impact of war in Ukraine on Ireland, senior figures in the coalition have insisted there is no prospect of short-term rationing of gas and electricity.

However, they said that all energy resources are now very precious and that planning for “scary” scenarios has to take place.

The State currently maintains a 90-day reserve of crude and refined oil product.

Sinn Féin leader Mary Lou McDonald said that fuel price rises overnight had already eroded the planned Government cut to excise duty, adding that her party wants the price of petrol and diesel brought back to €1.75 per litre and to be kept there.

Ms McDonald urged the Government to intervene to help reduce home heating oil costs.

Social Democrats co-leader Róisín Shortall said that Government cuts in excise duty on fuel “brings us back to where we were two weeks ago”.

She appealed to the Government to “cap prices at a maximum level” as “extraordinary measures” were needed.

“Peace-time rules should not apply during war-time,” Ms Shortall said, warning that already there are stories of “price-gouging”, and asked what the Government has been done to prevent this.

She asked if a “swing mechanism” would be introduced to moderate fuel prices, how likely fuel rations are, and whether the Government will take a greater dividend from the ESB’s “unprecedented” profits last year.

The representative body for the fuel sector in Ireland has said it is concerned that the reduction in excise duty on petrol and diesel will not be enough as wholesale prices rise.

Fuels for Ireland said that in the past 24 hours, the cost of diesel on wholesale markets rose by 22c a litre and that the Government must urgently press European partners to consider potential changes to VAT on fuel describing the situation as “urgent”.

Fuels for Ireland also expressed concern about retailers and suppliers who have purchased fuel supplies in the past few days and paid excise at the higher rate, who are now faced with the prospect of selling it at a loss.

Fuel price hike ‘demoralising’

Caoimhe Moloney from Pierce Kavanagh Service Station in Urlingford, Co Kilkenny, who also runs a coach business, said the recent hike in fuel prices has been “demoralising” and that people cannot afford to fill their cars.

She said diesel prices have increased by 52% since before the pandemic, and described the situation as “shocking” as prices continue to rise and suggested that the Government take money from reserves to meet the challenge.

“We’re getting notifications by the hour from our wholesale distributors and they’re going up. All the excise duty cut is going to do is bring us back to the prices that were on the forecourt last Friday.

“Ireland needs transportation and we need to move people and goods. If we aren’t able to do that, the country is going to plummet into a recession again. The average person is not able to fill up their car now.”

“I really welcome the work the Government has done in the last few days, trying to reduce excise duty. However, it isn’t sufficient. If they need to get on a plane and go to Europe and deal with the EU and change the directive and change the legislation, they need to do that,” she said.

Cut in agricultural diesel excise duty ‘underwhelming’

In the Dáil, Independent TD Verona Murphy said the 2 cent a litre reduction for agriculture diesel was “a joke and the farmers weren’t laughing”.

She also criticised the structure of taxation on fuel and said that the 23% VAT rate on fuel was a “tax on a tax”.

Roscommon TD Michael Fitzmaurice said that the Government needed to engage in more radical acts as soon as possible.

“The current crisis is so widespread it is affecting every aspect of the economy from agriculture and food security, to the building trade and the capacity of people to even afford to get to work. Even school bus contractors find it impossible to operate. The Government’s proposals, whilst representing a start, are not radical enough”.

The Irish Farmers’ Association Deputy President Brian Walsh said the 2 cent cut was underwhelming.

He said agri diesel is around €1.50 per litre at the moment, and even a couple of weeks ago he bought diesel for under a euro, “so 2 cents in terms of what a farmer burns to produce food won’t go far enough”.

Farmers need to see more urgency from the Government in dealing with this and dealing with increased costs, he said.

Mr Walsh said they are not getting the sense of urgency from the Government even though the IFA raised cost of inputs last January and they have rocketed since then.

Additional reporting: Will Goodbody, Tommy Meskill, Joe Mag Raollaigh, Conor Kane

Article Source – Ireland ‘not in a position’ to place a cap on fuel prices – RTE – Mícheál Lehane

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