The Republic is the third highest consumer of oil per head in the European Union (EU), according to a report published yesterday by State enterprise agency Forfás.

If this dependence on oil and on car transport is not reduced, then the economy will be threatened when the cheap oil supplies disappear, it finds.

The Forfás report argues that Ireland's rapid recent economic growth has pushed oil consumption to nine million tonnes in 2004, double the 1990 figure. "Some of this high dependence on oil is inevitable given the island nature of our economy," the report states.

"However, some is a matter of choice as Ireland has adopted patterns of transportation, spatial development and energy production that are oil intensive."

Forfás chief executive Martin Cronin yesterday warned that the supply of cheap oil would peak over the next 10-15 years and that Ireland needed to adjust its policies accordingly.

"We in Ireland are more dependent on imported oil for our energy requirements than almost every other European country."

The State's reliance on oil for electricity generation is more than twice the EU average, the report finds.

Due to more intensive patterns of car and freight transport, as well as cheap air travel, Ireland is also more dependent on oil for transport, despite a relatively low rate of car ownership.

Of the countries benchmarked for sensitivity to oil price changes, Ireland ranked amongst the most vulnerable, according to an "oil vulnerability index" contained in the report.

Mr Cronin said that, without Government action, Ireland could face falling growth, rising inflation and a deteriorating trade balance.