Fuel prices in Ireland are continuing to rise at an alarming level, and are now averaging well above €1 per litre. The average price now being charged at the pumps for unleaded fuel is 102.4c per litre and 101.7c per litre for diesel, according to the AA's fuel cost survey for May.
Although regional price variations are evident, with some service stations in highly competitive areas still charging below €1 per litre, motorists are being warned that the cost of crude oil is expected to remain high and therefore the cost of fuel will not decrease.
Only five months ago the average cost of a litre of unleaded was just 94.8c, while diesel cost just over half-cent more - the first time that the lower-taxed diesel was more expensive than petrol.
Since January prices have increased relentlessly, so much so that diesel prices are at an all-time high. This rapid surge in the cost of diesel, which has traditionally been favoured by courier and transport companies because diesel engines are more economical, has led to several logistic companies being forced to add a surcharge for road transport.
In March the price of diesel rose again, this time by 5 cent per litre, which again took its average cost above that of petrol.
The phenomenon whereby diesel, which in Ireland is taxed at a lower rate than petrol, has cost more at the pumps can be explained by the fact that during winter demand for diesel increases sharply because it is also used for home heating.
However, as Tom Noonan, managing director of the Maxol Group, points out, with world consumption of diesel continuing to rise, motorists will find diesel costing more and more. "Demand for diesel has been rising and the price we now pay for it has increased at a greater rate than crude oil," he notes.
The blame for the surge in the cost of fuel rests with rising world oil prices, which have stubbornly hovered around $50 a barrel. With increasing world demand for crude oil, especially from countries such as India and China coupled to the on-going instability in the Middle East, it is predicted that prices will average between $50 and $60 per barrel for the foreseeable future.
Noonan also explained that there is also another significant factor pushing prices up. "There are a lot of speculators who have moved into commodities, particularly oil," he said. "They are of course looking to turn their investment into profit." As such, warns Noonan, motorists should not bank on a reduction in the price they are paying at the pumps and he predicts that they should now expect to pay at least between €1 and €1.05 per litre.
That is unless the Government takes action to reduce the high level of tax it charges on motor fuels. At present almost 66c of every €1 spent on fuel goes to the government. "A tax break would be very helpful for motorists," said the AA's Conor Faughnan. "Tax represents a significant portion of the cost of fuel, which has risen dramatically recently. Only eight months ago, the cost of a litre of unleaded was just 87c a litre, now it is well above €1." Faughnan's call on the Government to act was echoed by Noonan. "The big winner in all of this is the Government, the extra revenue it gets from every increase of just 1c per litre is enormous. They are better placed than most to do something about this for the motorist."
However, Irish fuel prices, although increasing, still remain close to the EU average. The latest EU survey, which was carried out at the end of April 2005, reveals that 1,000 litres of automotive gas oil in Ireland cost €992 inclusive of all taxes and duties.
At the beginning of the year, the cost was just €975. Of the other EU countries, Latvia remains the cheapest with the same amount of fuel costing just €781.38.
But it is our neighbours in Britain that continue to pay the highest fuel charges in the EU with 1,000 litres of fuel costing a huge €1320.60, which clearly exemplifies the British government's high taxation policy on fuel.