Deputy Flynn has been given permission to raise an item on the Adjournment. The Deputy has 20 minutes.
Adjournment Debate. - Oil Price Increases.
Ba mhaith liom mo bhuíochas a chur in iúl duit agus don Cheann Comhairle as ucht an seans a thabhairt dom an cheist fíorthábhachtach seo a phlé sa Dáil. Chuir na fógraí maidir le hardú praghsanna artola a ritheadh sna nuachtáin i rith na seachtaine díoma mhór ar an phobal uilig, agus tá mé ag iarraidh ar an Aire cur i gcoinne na harduithe seo agus a insint do na comhlachtaí artola nach bhfuil sé sásta na harduithe a chur i bhfeidhm.
I would like to take the opportunity of thanking the Ceann Comhairle for giving me the opportunity to raise on the Adjournment the question which is exercising the minds of most people for the last few days. It is the question which has been raised in the public press concerning proposed price increases and the applications made to the NPC for further increases in petrol prices. The purpose of raising this matter tonight is because the public are flabbergasted at this recent announcement in the media. I wish to exhort the Minister, and through him, the Government to put a stay on the rising cost of petrol to the consumer. It has reached the limit as far as we are concerned and the consumer can no longer bear any further burden.
The general public have been shocked at the announcement of the application to the NPC for a further increase in the price of petrol. The stop-go attitude of the Government in relation to the price of petrol is incredible and does not show any pricing policy or any official strategy of the Government in this regard whatsoever. The public are totally confused with the misleading statements emanating from the Government in the recent past concerning petrol costs.
On one occasion in the recent past we had a major exposé from the Minister for Industry and Energy promising continuous reductions in the price of petrol to the consumer. We now see that these cannot materialise. We have the Minister for Trade, Commerce and Tourism telling us that price increases are being sought by the petroleum companies. As we know, the inevitable result of these applications to the NPC will be an application before the Government and the announcement of the increase. The timing of it will be, as is always the case with this Government, at a suitable time for their purposes, more than likely when the House has risen and they do not have to suffer the inevitable flak coming from this side.
(Interruptions.)
I see I am stirring Deputy Manning. No doubt, he is feeling the pinch because he is one of the great antagonists towards his Government so far as this price structuring is concerned. There is absolutely no justification for the proposed increases being sought through the NPC at this time. I am asking the Minister, pending the receipt of the report from the committee of investigation which he has set up to inquire into oil prices generally, that he should suspend a decision on the application made by the oil companies. That would be the least that could be expected of him, seeing that we have had such conflicting statements from various Ministers. It is obvious that there is no cohesion or co-operation between the various Departments of State and that one Minister is not aware of what the other is doing. The Minister of State might remind the various Ministers involved that they are at variance with their public statements. Until such time as the Minister for Industry and Energy's committee reports they should suspend any move on the application currently before the national Prices Commission.
The public are quite satisfied that they are being ripped off. Consumer resistance is evidence of that fact already. That must be borne in mind by the Minister in considering this new application. Any further increase will have a detrimental effect on the whole of our economy, on our competitiveness, the tourism and agricultural industries and industrial relations. Indeed, all household budgets will suffer as a result of this new attack on petrol prices. As we are all aware this catches everyone; it is a tax that takes no notice of one's ability to pay and no notice of the hardship it might cause industry or the individual. So far as our competitiveness is concerned we contend it is not a suitable time, nor from the point of view of household budgets, to have a further imposition by way of petrol price increase. Talk of price increases makes nonsense of the Government's recent harping on price competitiveness in industry. How can industry currently struggling to maintain their market share hope to stay in business if their unit costs of production escalate further? To allow a petrol price increase at present would condemn thousands of people to the dole queues. Further it will close hundreds of factory doors, creating misery not just for the workers but also for employers. It makes nonsense also of the efforts of the Government at this time in so far as industrial relations and conducting wage negotiations with various bodies are concerned. How can one expect any trade union worth its salt to impress on its members the need to show restraint in so far as wage structures are concerned when on the other hand the Government themselves accept the inevitability of further price increases in petrol?
We all know that petrol is a commodity that affects every single person, body and company because inexorably it adds to the transport costs of the production line. As we are also aware, energy costs are fundamental to all manufacturing industry. If this latest price increase takes place it will have a very serious impact on manufacturing industry, not to talk about the individual consumer or hard-pressed motorist who suffers every single time the Government wish to raise some extra revenue. We pay the highest price in Europe for petrol. I believe that on average it would work out something of the order of 31 per cent higher than the average European rate. Government action is urgently required to protect our overtaxed motorist who carries more than his fair share of general taxation. We must bear in mind the comparisons, that one can still buy a gallon of best premium grade petrol in the United Kingdom for £1.84, in the Netherlands for £2.07, even in France it can be bought for £2.27 and cheaper again in Italy. But we must head the league in this matter. There is something basically wrong with the whole pricing structure that that should be the case. How difficult it must make life for everybody concerned with regard to productivity, wage levels, unit costs of production, to maintain any level of competitiveness if they are to have this continuing imposition placed on them by way of increased energy costs.
We are already experiencing the most difficult tourist season ever. To further penalise what must be regarded as an export industry by way of a petrol price increase at this time is nothing short of sabotaging that tourist industry. We must remember that we have now reached the stage of diminishing returns. It would appear that the Government do not appreciate that fact. As I understand it, in April and May this year petrol sales dropped nationally by up to 20 per cent. What do we get by way of exchange to try to entice the already hard-pressed motorist to increase his purchases of petrol: we get the new syndrome called the offer situation at the petrol stations. Companies are engaging in promotions in an effort to outdo one another on sales. One might well ask: at what cost? We have now the 40p tin of coke if one buys £10 worth of the particular flavour of juice. There is also the cutlery offer if one buys £120 worth over a period. We have the newest entry into the stakes, the digital watch which I understand is being promoted by a company called Maxol if one purchases £100 worth of their particular fluid. It is estimated that the retail price of this digital watch is approximately £28.
Not bad.
As far as I am concerned, that is 28 per cent on the £100 worth of petrol. When companies can justify an application to the National Prices Commission for a price increase of 7p — which I presume would work out at approximately 2 per cent to 2½ per cent on the retail price at the pump — and at the same time can turn around and offer a £28 digital watch to the consumer if he purchases £100 of their brand of petrol, then surely it is about time the motorist reaped the benefit of all these reductions the companies are able to afford? They can buy one million watches to give out to consumers if they can entice them to purchase their brand of petrol.
The time for gimmicks at the petrol service stations and pumps are over. The consumer should receive the full benefit of all that loose money obviously available and being expended in a campaign to do down one's competitor. Of course there are other kinds of things on sale at the petrol pumps as well which shall be nameless at this time. It would be interesting if the Minister this evening could quantify in cash terms the amount of money he knows is being expended on these gimmicky offers at petrol pumps, if he took some cognisance of what is going on at the petrol pumps and service stations in the race for increased sales among companies. He might bring to their notice that, rather than have a gimmicky sales offer at the pump, they might give the reduction to the consumer in the basic product they sell. These kinds of offers confuse the consumer totally. Nobody accepts, because of these offers, that the companies are hard up or that they are losing enormous sums of money.
On the one hand we have a situation of diminishing returns while, on the other an enormous number of retail petrol stations have gone out of business in the recent past. For example, in 1970, there were 4,772 petrol retail outlets in this country. In 1983 it is estimated that there are 3,874. Whether we like to admit it or not that must mean an enormous number of job losses as well, not to mention the situation obtaining in the Border counties.
According to our clock, not a digital, the Deputy has five minutes remaining.
I am quite sure you have it right anyway. There is an enormous loss of revenue in the Border counties because of these prices. It is calculated that about half the amount of money paid for petrol in the Border counties, estimated at £50 million, is being lost to the Exchequer because of Government action in this respect.
The tourist industry must be singled out for special attention. How can the Minister, as Minister for Tourism as well, suggest to the people of this House that he will allow promotional operations to carry on right around the world, that he will himself get involved in promotional activities on behalf of our tourist trade and, at the same time, penalise the very industry he is promoting by making it virtually impossible now for the motoring tourist to come here and have a reasonably-costed holiday?
The world trends in crude during the past two years have been downward. North sea oil and African crude have been reduced by up to 25 per cent. The price of a barrel of oil in that period has gone from $39.25 to less than $30 but we never seem to get the benefit of these reductions. Earlier this year the Minister of State, Deputy Collins, had the gall to say that he would be asking the oil distributing companies to put their act together. I should like to know what he has done about the matter. He also understood that the increases were causing frustration. Imagine that statement from the Minister responsible to the consumers of this country — that oil prices were causing frustration — when he knows full well it is causing much more than frustration. It is putting thousands of jobs on the line and it is bringing us to a situation where we are not just the most highly priced country in the world so far as petrol is concerned but we are fast becoming the most expensive country on any score in which to live.
In the past few days the question of the possible decontrol of petrol prices was raised. The Minister indicated he was not considering the decontrol of petrol prices here. I expect him to reiterate that commitment this evening, to put the minds of people in the west of Ireland at ease that a two-tier pricing structure will not apply in this country. I hope the good socialist Minister will indicate that he is favourably disposed to maintaining the same price for petrol in Binghamstown as in Palmerstown.
It is about time the Minister and his colleagues lifted the veil of secrecy off oil supplies and oil suppliers, the multinational subsidiaries and the contracting procedures that apply in sending oil to this country. We would like to know what the world price situation means in Irish terms. We would like to know about the better arrangements the Minister has in mind with regard to continuing contractual agreements with suppliers throughout the world. We would like to know about the sources of supply for the next contracting period. We also wish to know what the Minister intends doing about building up storage capacity in this country so that we could have a floor price on a long-term basis. Is the Minister prepared to make financial arrangements for the forward purchasing of dollars so that an even balance can be maintained throughout the whole financial year? We would like to know if the Government have renegotiated any of their Saudi contracts and what impact they will have. We would like to know when we will get the benefit from the reduction ex Whitegate refinery and when we will get the benefit of the spot market at Rotterdam. We are told daily in the media that there is a reduction in the price of crude and that it should be reflected in the price at the pumps. The Minister has not given us any of this information.
I wish to impress on the Minister the need for a clear-cut statement that he rejects out of hand the present application by the oil companies to the NPC. We want an assurance that he will not allow them to have an increase of the nature they are talking about until the results of the full investigation is put before the public.
I should like to apologise to Deputy Flynn for not being here when he commenced the adjournment debate. I was at a meeting outside the House.
I know both of us were caught a little on the hop.
I did not anticipate the debate starting earlier than 10.30 p.m. I wish to assure the Deputy that no discourtesy was intended.
Deputy Flynn raised a number of issues, particularly in the final portion of his speech, regarding contracts for the supply of oil, storage and so on but these matters are not appropriate to my Department. The only function that my Department and I, as Minister, have with regard to oil is to have any application for an increase examined by the National Prices Commission and to make a decision on that. The other matters raised are appropriate to the Department of Industry and Energy. I am sure Deputy Flynn will appreciate that, as will his colleague who was in that Department.
What about the forward buying of dollars?
I will talk about that later. As the House may appreciate, in accordance with section 25 of the Prices Act, 1958, all particulars of price increase applications on hands must be treated as confidential and I am precluded from commenting directly on whether oil price increase applications have been lodged with the National Prices Commission. The House will appreciate that the 1958 Act specifically states that any application for a price increase must be kept confidential. The reason for that is that if one company makes an application and the other companies become aware of that there could be a rush of applications for price increases that might not be justified. However, within those constraints I will endeavour to be as explicit as possible.
There have been newspaper reports recently of price increase applications by a number of oil companies. If these applications have been lodged they will, I assume, be examined in the usual way by the National Prices Commission and the commission will make their recommendation to me in due course. Under current arrangements oil companies are required to give two months notice of their proposals to increase prices. Therefore, at this stage newspaper comments on the extent or timing of oil price increases are largely speculative and I do not propose to comment on them at present.
It might be helpful if I said a few words of a general nature about some of the international trends which have been emerging in recent times which reflect themselves on the Irish market. I refer specifically to the fluctuations in the exchange rate, particularly between the dollar and our currency. As Deputies are aware, the price of oil is quoted in dollar terms and what happens in relation to the exchange rate between the dollar and the punt has a direct bearing on that.
The US dollar is the currency in which oil is traded in internationally. At the beginning of 1983 the IR£-US$ exchange rate was around IR£ = $1.39. By 1 April, 1983 — the occasion of the last oil price review here — the rate had fallen to IR£ = $1.31 and this is the rate at which the oil companies are at present compensated for in their prices. In recent weeks the punt in dollar terms has declined to a level below $1.22 but has since made some recovery to a level of $1.25. However, the overall currency movement involved obviously means that no matter what price control system exists it now costs more, for currency reasons, to import oil products into Ireland.
That is because of the Government's devaluation policy.
No. The prices quoted on the Rotterdam spot market are a relevant factor in the price of oil traded in Ireland. In the early part of the year these prices were relatively low, reflecting the anticipation of a fall in official selling prices of crude oil. Since the crude oil price reductions in March 1983, however, prices on the Rotterdam market have been steadily increasing. This clearly has an impact on the product costs of the importing companies.
Needless to say, of course, we are not alone in Europe in feeling the results of these trends. Belgium, the Netherlands and Germany, for example, are much more dependent on the Rotterdam spot market for their prices than we are, and the recent rise in spot prices has resulted in sharp rises at retail level in these markets.
In addition, most other European currencies, except sterling and perhaps the Deutschemark, have declined against the dollar in recent weeks, again leading to retail price increases. Thus since the beginning of this month, Belgian petrol prices have risen by around 3½p per gallon, those in Germany by about 5p per gallon, and those in Italy by about 6p per gallon. The EEC average increased in the same period by approximately 2½p per gallon. The Irish price, on the other hand, has remained static.
There has been a great deal of comment and speculation regarding the price of oil and particularly the price of petrol. Unfortunately, a lot of that comment has been ill-informed. Many of the quotations were based on an EEC publication which showed that these commentators were not comparing like with like and if they tried to do so they would come out with a distorted view.
I hold no brief, and never did, for the oil companies whether international or domestic, but I have a responsibility under the existing law to ensure that fairness prevails. My interest is in the consumer and the protection of the consumer, and to the best of my ability I will ensure that those interests are protected.
Is the Minister going to stop the gimmicky price war at the pumps?
All I can do under the existing law, and I want to emphasise this, is to set a maximum price. If people want to sell below that price they are at liberty to do so. I cannot interfere with that practice. Because there has been so much ill-informed comment over the last few months, and because there has been an expectation that a reduction in oil and petrol prices was just around the corner, I thought it desirable to ask the National Prices Commission to carry out an indepth study into the price of oil and particularly the price of petrol. I did not fuel any expectations and I sincerely hope it will be possible to make a reduction in oil prices. Naturally in my position I fervently hope it will not be necessary to increase oil and petrol prices but the only undertaking I can give the House — and I am talking within the constraints of the 1958 Act which precludes me from acknowledging whether any application has been made to increase prices — is this: any application which may be made will be thoroughly examined and will have to be justified 100 per cent before any increase is given.
Will we get cheaper petrol instead of watches?
The Deputy asked about price control. I asked the National Prices Commission to look not only at the whole pricing mechanism but to see if it was beneficial to continue exercising control over the price of oil and petrol. All the relevant factors will be examined to ensure equity prevails. I give this undertaking: it is not my intention to see people penalised because of their geographic location.
Is that a categorical assurance?
I am saying it would not be my intention to do so. I said that before and I am saying it again. I have no plans at this time to decontrol the price of petrol, but as I have an obligation to examine any recommendation which comes to me from the appropriate body, the National Prices Commission, I will give all aspects a full examination. A major factor in my examination of their recommendations would be to ensure that people would not be penalised because of their geographic location.
I am glad this issue was raised and I hope it has cleared the air to some extent. If there is an application under consideration at the moment, or if an application comes under consideration in the near future, the normal approach will be made to it and the normal criteria will apply. I have asked as a matter of urgency for a full investigation by the National Prices Commission into the present situation so that we can be assured of all the facts which are relevant to the pricing of oil and petrol here.
When will the inquiry be finished?
I hope in the near future.
The Dáil adjourned at 10.27 p.m. until 10.30 a.m. on Thursday, 23 June 1983.