Motorists were warned yesterday to expect a further rise in the price of petrol, despite a 5 cent jump in the cost of a litre of unleaded over the past fortnight, write Joe Humphreys and Marc Coleman, Economics Editor.
The AA said yesterday that the average price of a litre of unleaded petrol had risen from €1.05 to €1.10 in less than a fortnight. Warning of further increases ahead, the motoring body reiterated its call for the Government to reduce taxes on petrol and diesel.
Brent crude oil - an accepted benchmark for oil prices - rose to a price of $60.98 in London on Monday amid concerns about the death of King Fahd of Saudi Arabia before falling back slightly yesterday to $60.40.
Some oil distributors here said they were considering another price rise, including Maxol which is holding a pre-scheduled meeting today on the issue. Tom Noonan, managing director of Maxol Group, said: "It is not in the our interests to have high prices. It puts pressure on our margins, and ultimately it will depress demand."
However, he said that oil companies had to respond to changes in international oil prices, whose impact had been heightened by a strengthening dollar. "Price has been continuing to rise in recent months. But I think the trend is still up," he said. "Consumer resistance is beginning to kick in in some markets and my gut feeling is that we may not be too far from the peak from this current cycle. But I am nearly a lone voice on that."
Oil prices stayed near record highs on trading in London yesterday. The death on Monday of King Fahd drew the attention of markets to the risk of future political uncertainty in Saudi Arabia, notwithstanding the relatively quick accession to the throne of the king's brother Crown Price Abdullah.
These developments are occurring against a backdrop of concern about the impact of rising demand for oil in China, as well as concerns about political stability in Iraq and Iran. A spokesman for Esso, which raised its prices at wholly owned service stations by 1 cent a litre a fortnight ago, said it was monitoring cost increases.
"Retailing fuel is a highly competitive business and there are very slim margins. What we would be doing is reviewing our prices versus our competitors and adjusting our prices downwards or possibly upwards to remain competitive." The average price of a litre of diesel rose by more than 5 per cent to €1.05 between April and July, said the AA. The price has since crept up to the €1.10 threshold.
Fuelling the rise is an increased demand for petrol during the summer. Industry sources said home heating oil consumers, already struck by inflation, would take a further price hit in the winter.
Fine Gael finance spokesman Richard Bruton warned that the price rises had implications for the competitiveness of the economy.
Claiming rising profit margins were contributing to the increases, he said: "We need to look at what are reasonable mark-ups and provide consumers with information so they know what prices they should be charged.
"I find it extraordinary that the Government doesn't even monitor changes in price. Because they are automatically taking one-fifth of everything in taxes, they are happy to sit on their hands."
However, Mr Noonan rejected the claim that companies such as his were benefiting from the situation, saying "a lot of these increases are being pushed along by traders".
Texaco Ireland said that as well as crude oil prices, there were a number of factors which influenced the price of petrol at the pumps, including exchange rates, product costs, local market environment, distribution costs, and staff and marketing costs. In addition, Texaco said independent retailers were free to set their own pump price.