Unless you are blind, or very rich, or both you cannot help but notice that the price of fuel has got completely out of hand in recent months. We are now paying well over €1.60 and getting on for €1.70 per litre for petrol, and €1.60 is typical for diesel.
This is by far the most expensive price we have ever paid for fuel. The last big surge in oil prices came during 2008. That Summer oil reached a peak of $148 per barrel and we paid €1.34 at the pumps. Oil has not actually reached that high yet this year – it has been hovering in the $120 range.
So why are we paying so much? It is a question that the AA gets asked every day of the week. There are basically three things going on and two of them are outside of our control.
Firstly, the Euro has fallen in value against the US dollar. A year ago one Euro was worth $1.49, now it is worth about $1.31. That adds about 12 per cent to the cost of the oil that we import.
Secondly, oil prices and the price of refined products like diesel and petrol have increased very significantly in Europe. This is a bit bizarre because European demand is down and it may be caused in part by traders being reluctant to invest in currencies or shares because of recent turbulence and choosing to invest in commodities instead. Iran is a factor as well. Whatever the cause it is a pan-European phenomenon and motorists are complaining about prices from Mayo to Munich and all points in between.
The third factor is the one we can control – Irish taxes. Since the emergency budget of October of 2008 there have in fact been five separate tax hikes on both petrol and diesel which between them added about 22 cent per litre to the cost at the pumps.
Those super-taxes mean that we join countries like the UK and the Netherlands in having very expensive fuel. Those countries do not also have Vehicle Registration Taxes, extensive tolls, a 5 per cent insurance levy, high annual car tax and 23% VAT like we do. We now have a unique position in having high transport taxes right across the board.
For a country where 96 per cent of all freight has to move by road this is not a winning strategy. It is certainly causing havoc for ordinary families. It is not uncommon now for the fuel cost for one car to be over €300 per month where the same fuel cost €190 three years ago.
While the government wants to take in all the tax that it can they must now recognise that this super-tax policy has run out of road. The total amount of fuel being sold is falling and not just because of the recession. People are telling us that they are cancelling journeys and even giving up jobs with long commutes because they cannot pay the inflated prices. Money spent on fuel cannot be spent on other things which means less local employment and less tax revenue.
I will be writing more on these and other issues in these pages over the coming weeks. No-one is enjoying the recession but at the same time there are positive stories to tell so I plan to be a little more upbeat in my future remarks. It is not all doom and gloom out there.
Unless you are filling your tank, that is.