Skip to main content
Normal View

Dáil Éireann debate -
Wednesday, 9 Oct 1996

Vol. 469 No. 6

Adjournment Debate. - Oil Price Increase.

I thank you, Sir, for allowing me raise this matter on the Adjournment and I thank the Minister for coming in to reply.

This issue attracted so little media attention that when it was brought to my notice by some oil distributors I wondered if it were true. The office of the Director of Consumer Affairs received complaints about the matter and people telephoned an RTÉ radio programme this morning about it. There has been a dramatic increase in the price of home heating oil and kerosene in the past eight weeks. A reduction of 1 penny or 2 pence in the price of a gallon of petrol would make headlines and oil companies would boast about reducing the price of their product to the consumer, industry and so on, but nobody seems to care when the hard pressed consumer has to pay £40 or £50 more for 1,000 litres of home heating oil.

The office of the Director of Consumer Affairs informed me that it does not have control over the matter, that oil companies can charge what they want for their product. I was informed the price is dictated by market forces, but it appears oil companies are operating a cartel to keep prices high. All oil companies have increased their prices.

Nobody seems able to tell me why these prices have suddenly risen. There have been vague suggestions that it is because of the situation in Iraq. There is also a suggestion that the costs are associated with the oil refinery at Whitegate where costs have risen resulting in dearer oil. I have also been told there is a new EU Directive on low sulphur diesel which has led to the increase. Does this mean another process has to be undertaken at Whitegate resulting in additional costs? If that is the case, why is only home heating oil and kerosene affected? Perhaps the Minister will clarify the matter for me.

If what happened with home heating oil was repeated with petrol and diesel it would have a dramatic impact on the costs associated with industry. I have been informed that the price of diesel has gone up recently by up to 25p per gallon and there was a smaller increase in the price of petrol of 1p per gallon this week. However, these do not appear to have attracted any attention. If this continues it could lead to job losses and a rise in inflation which our economy does not need.

I am not aware of any price increases occurring in our neighbouring European countries. If that is the case, we need to know why it is happening here in isolation. The Minister must take effective action to stem these increases.

As Deputies are aware from previous statements by me and my predecessors, in recent years the policy of successive Governments has been to promote the model of free and fair competition generally with the aim of creating greater price competition and wider consumer choice. From this point of view, the price of petroleum products was decontrolled in September 1991, with the entry into force of the Competition Act, 1991.

Oil companies or petrol retailers are not obliged, therefore, to give me advance notice of their intention to increase prices or margins. The rationale for this is that competition reigns. I understand that at present there are in excess of 300 distributors engaged in selling home heating oil, while there are 12 companies which import this product in wholesale quantities. Thus there is no shortage of wholesalers and retailers and, therefore, there ought not to be a shortage of competition. Supplier competition need not however always be synonymous with low or falling prices. It all depends on market fundamentals.

In this regard, information provided to me by the Department of Transport, Energy and Communications indicates the underlying factors behind the increase in home heating oil prices over the past two months. Oil companies vary their prices in line with the basic price of oil products on the international market and also reflect other factors such as excise duty and compulsory purchase of supplies from Whitegate. Crude oil prices have risen from $19 per barrel at the end of July to $23.50 today, having reached $24 per barrel during September. Prices for gas oil, from which home heating oil is derived, rose from $177 per tonne at the end of July to $233 per tonne at the beginning of October. The rise in crude oil prices was influenced by, among other things, concerns regarding stability in the Middle East.

Demand for home heating oil is also traditionally higher at this time of the year throughout northern Europe as winter approaches. Increased demand tends to exert upward pressure on wholesale prices.

I am also informed that the Department of Transport, Energy and Communications collects statistics on consumer prices of oil products for the purposes of providing information on the operation of the oil market in Ireland to the EU Commission. Based on these returns, average final domestic prices for home heating oil have been as follows in recent months: on 1 July 1996 — 25.2p per litre; on 5 August 1996 — 25.3p per litre; on 2 September 1996 — 25.7p per litre and on 7 October 1996 — 28.5p per litre.

Essentially, therefore, the oil market — for a variety of reasons including seasonal factors and geopolitical developments — seems to be signalling higher prices on grounds of uncertainty and risk assessment. That said, it is also the case that the State must be ever vigilant in the interest of the consumer and in favour of full-blown competition. In this regard and on this issue I intend to keep in close contact with my colleagues, the Minister for Enterprise and Employment, who has responsibility for competition policy, and the Minister for Transport, Energy and Communications, whose Department monitors developments in the energy sector, with a view to ensuring that the consumer is not exploited, that competition policy prevails and that inflation is kept under control.

Top
Share