asked the Minister for Industry, Trade, Commerce and Tourism the steps that he has taken to get the commercial petroleum distributors to reduce the cost to the consumer of diesel oil, domestic fuel oil and heating oil as the reasons given for reducing the price of petrol must also be relevant in reducing the cost of these products; and if he will make a statement on the matter.
Written Answers. - Oil Cost Reduction.
446.
While the voluntary reductions in petrol prices announced by the oil companies recently may have been attributed initially to an improvement in exchange rates, marketing considerations were also a major factor. The reductions effected were much greater than that merited by exchange rate movements on the cost of petrol alone.
Maximum prices for the major petroleum products are fixed by maximum prices order but this order does not prevent oil companies from selling at prices below the levels set out in the order. In fact, the allowance of discounts and rebates on sales of gas oil and fuel oil has been quite commonplace for many years and the petrol price reductions introduced are welcome evidence of price competition in the petrol market also.
Petroleum product prices are kept continually under review in the light of the movements of the various cost factors that make up the maximum price. Included in these factors are currency exchange movements as the oil companies, who purchase imported product in US dollar terms, have to be compensated in IR£ terms for the dollar costs incurred. The value of the IR£ relative to the US dollar fluctuates daily and to achieve some consistency in Irish prices, it is necessary to average out these fluctuations over time. This has in the past been achieved by fixing an exchange rate at the time of each product price adjustment and making allowance for gains and losses in the interim at the time of the next price change. In recent times, adjustments have been made generally on a quarterly basis. When the latest product price adjustment was made in early January 1984 an exchange rate of $1.14 was used and this is still reflected in the maximum price. The selection of this rate for the current quarter has proven to be reasonably fair to all parties as the actual daily exchange rate since then has averaged $1.10 in January when exchange losses were incurred by the oil companies, $1.14 in February and at slightly less than $1.14 for the 11 week period to date. In these circumstances, there was no equitable basis for making an adjustment in the maximum prices order until the oil companies had been given an opportunity to recoup exchange losses incurred by them during January 1984.
The question of an adjustment of the prices set under the maximum prices order for all controlled petroleum products is currently under examination in the light of all the relevant factors which will include product and other cost increases and relative price movements of various types of petroleum products in markets abroad. In fixing the appropriate exchange rate, account will be taken of the more recent movements in the value of the IR£ relative to the US dollar.