Pump prices unlikely to reflect oil slump

Motorists are unlikely to enjoy the full benefit of the latest fall in oil prices while the Government continues impose heavy taxes on petrol and diesel, industry figures say.

Crude oil tumbled below $36 a barrel on world markets for the first time since 2009 on Monday. It recovered later in the day, but Tom Noonan, chief executive of Maxol Ireland, said that there is no real sign that it has reached the bottom. "Prices will remain low and will drop even lower," he said.

However, motorists are unlikely to see the full impact because the Government collects almost 90 cent from sale of every litre of petrol, according to Conor Faughnan of AA Roadwatch.

AA figures show that petrol sells for an average of €1.295 a litre. That is down from €1.45 in July, but higher than the €1.18 for which it sold in 2009, the last time that crude oil prices fell to current levels.

More expensive

Similarly, diesel costs €1.182 a litre, down from July, when it cost €1.29, but still more expensive than in 2009, when the price was €1.15.

Mr Faughnan said two factors explain the difference between now and six years ago. The first is the euro’s weakness – it has fallen 12 per cent against the dollar, the currency in which oil is traded, this year.

The second is tax. Excise is 58.771 cent on a litre of petrol and 47.902 on a litre of diesel. Combined with 23 per cent VAT, these fixed charges give the State 88.44 cent from the €1.29 average paid for a litre of petrol and 75.34 cent from the €1.18 paid for a litre of diesel.

According to the AA, the retailer gets four cent a litre, lower than their margin on a cup of coffee, and the wholesaler gets eight cent.

“The Government is really the biggest snout in the trough,” Mr Faughnan said.

On top of this, the Government has not reversed 20 cent a litre tax hikes brought in during the period of austerity, which began with it adding eight cent to a litre of petrol and five cent to diesel in its 2008 emergency budget.

Exchange rate

Mr Noonan agreed that both taxes and the dollar exchange rate are key parts of the price.

He said that, when oil prices fall, the US currency frequently strengthens as speculators see it as an alternative to crude.

Mr Faughnan recommended that motorists should shop around when buying fuel, as prices vary from forecourt-to-forecourt.

“Five cent a litre less is a €2.50 saving if you’re filling a 50-litre tank,” he said.