It has been a week since the US and Israel began air strikes on Iran, prompting retaliatory attacks from Tehran and a spike in global energy prices. RTÉ’s Economics and Public Affairs Editor David Murphy reports that Irish consumers are already feeling the financial impact.
Petrol and diesel prices have risen sharply in Ireland. Last month, the average price for diesel was €1.72 per litre and petrol €1.73, according to the AA. Many filling stations now charge €1.80 for unleaded petrol and up to €1.90 for diesel. The wholesale price of oil has surged this week from $72 to over $91 per barrel. Independent motoring expert Conor Faughnan from Carzone noted that while there is usually a 10-day to two-week lag before wholesale price rises hit pumps, this time prices jumped within 24 hours of the conflict’s outbreak.
The home heating oil market has seen an even steeper increase. According to price comparison website oilprice.ie, 500 litres of home heating oil cost under €500 earlier this year, but prices jumped to €833 last week following the conflict. The spike prompted a political response, with Minister for Enterprise Peter Burke instructing the Competition and Consumer Protection Commission to investigate. Industry group Fuels for Ireland rejected claims of price gouging, attributing the rise to higher refining costs and global demand.
Natural gas prices in Europe have also climbed sharply, rising from just over €30 per megawatt hour to more than €50 this week. Irish suppliers typically book deliveries 12 to 18 months in advance at fixed prices, which has helped shield consumers temporarily. However, Irish retail gas prices remain the third highest in the EU. Bank of Ireland chief economist Conall MacCoille said, “Irish retail prices for natural gas surged following Russia’s invasion of Ukraine, but haven’t fallen back in line with European wholesale prices.” Because roughly a third of Ireland’s electricity is gas-generated, higher gas prices could eventually influence power bills.
The spike in energy costs is expected to feed into inflation and the wider cost of living. Fuel increases affect transport costs, food prices, and other goods, as businesses pass higher energy bills to consumers. Philip Lane, chief economist at the European Central Bank, warned this week that a reduction in Middle East fuel supplies could trigger a “substantial spike” in inflation. Eurozone inflation currently stands at 1.9%, just below the ECB’s 2% target. If prices continue to rise, interest rates may be adjusted to control inflation.
The rise in fuel costs coincides with the phasing out of energy credits in Ireland’s Budget this year. While the fuel allowance continues, Minister for Public Expenditure Jack Chambers has ruled out additional short-term relief for households or businesses. For consumers, the impact will largely depend on how long the Middle East conflict continues and how global fuel prices evolve in the coming weeks and months.
