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Fuel Prices.

Dáil Éireann Debate, Thursday - 29 May 2008

Thursday, 29 May 2008

Questions (2, 3)

Liz McManus


2 Deputy Liz McManus asked the Minister for Communications, Energy and Natural Resources the average price of petrol and diesel in May 2004 and in May 2008; the proposed increases in ESB and gas prices planned for 2008-09; the action he will take to ameliorate the hardship for those on low incomes and senior citizens; and if he will make a statement on the matter. [21610/08]

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Oral answers (32 contributions) (Question to Minister for Communications, Energy and Natural Resources)

The price of oil and diesel or petrol, which is set on international markets, is outside our direct control. The Irish oil industry is fully privatised, liberalised and deregulated. There is free entry into the market. Prices at the pump reflect market factors such as global market price, transportation costs, euro-dollar fluctuations and other operating costs. In April 2008 the average price of petrol in Ireland was €1.20 per litre. The average price of diesel was €1.24 per litre. In April 2004 the average price of petrol was 93.8 cent per litre and that of diesel was 85.3 cent per litre.

Under the Electricity Regulation Act 1999, as amended, electricity and gas prices are the statutory responsibility of the independent energy regulator, the Commission for Energy Regulation. I have no direct function in setting or regulating energy prices. I am, however, advised that the commission will commence its annual tariff review of Bord Gáis energy supply and ESB customer supply in the coming months. The commission has signalled that the recent upward trend in international fuel costs may have significant impact on electricity and gas costs for the coming tariff year 2008-09.

Increasing energy costs pose particular difficulties for vulnerable consumers, including the elderly and those on low incomes. A number of schemes are in place to assist those on low incomes in regard to fuel and electricity costs as well as to enhance the key contribution of energy efficiency to alleviating fuel poverty. The Revised Estimate for the Department of Social and Family Affairs includes provision of €158 million in respect of fuel allowance and electricity and natural gas allowances. I have provided €4 million to fund the warmer homes scheme in 2008. This scheme supports the installation of energy efficiency measures, including attic insulation, draught proofing, hot water cylinder insulation and wall cavity insulation. The scheme is co-ordinated by Sustainable Energy Ireland and is delivered principally through community-based organisations. Over 9,000 homes have benefited from the scheme since its introduction in 2003.

Additional information not given on the floor of the House.

The scheme is targeted at householders who are in receipt of the fuel allowance, disability benefit or invalid benefit and is provided either free of charge or for a nominal fee, less than €100. Households are identified by community-based installers working closely in association with other intermediaries including the Society of St. Vincent de Paul, health services and GP networks.

The fuel poverty action research project is assessing the effectiveness of the interventions delivered under the current warmer homes scheme in addressing fuel poverty. Its final report is due in coming months. Information on all national and local schemes of assistance in respect of fuel poverty is provided in the cross-agency information pack Keep Well This Winter, Stay Well and Warm.

In addition, my colleague, the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, introduced a new housing aid for older people scheme last November which provides targeted support to improve conditions in the existing housing of older people. The scheme supports works that can improve the energy efficiency of homes, including insulation, provision of central heating and repair or replacement of windows and doors.

The Minister must recognise that this is a grossly inadequate response to what is a real and extensive problem. I ask him to recognise that the impact of fuel poverty is very severe. It can and does take human life. On this island, it is reckoned that approximately 2,500 lives are lost in winter.

A fuel poverty strategy is in place in Northern Ireland. Does the Minister not accept that he has a particular responsibility to protect those vulnerable people who will simply not be able to heat their homes this winter? I ask him not to be so coy when it comes to giving information. We all know that Bord Gáis is talking about an increase of up to 20% and that the ESB is talking about something similar. In respect of petrol and diesel prices, will the Minister look to the example of Australia where a petrol commissioner has been appointed to take on the oil companies? Has the Minister dealt with the mystery of why diesel is still more expensive than petrol? Will he state how he intends to reduce the impact on people on low incomes and indeed people on incomes that are not necessarily that low because the pool is increasing all the time? These are the people directly affected by the steep rise in utility and petrol costs which we will see over the coming winter and which needs to be prepared for now and not left on the long finger.

We all need to recognise what the problem is. We need to represent the people and show them what the real problem is, which is that we are facing a peak in global oil production that is forcing prices up. We are not yet at the peak but we are close to it. We will see a plateau period where prices may go up or down but, inexorably, due to that geological certainty, we will see fossil fuel prices rise. We have a duty to be honest with the people, illustrate the scale of the problem and start leading this country away from our use of fossil fuels as the only correct long-term solution to protect us from this issue. There is——

That is sheer hypocrisy.

That is not hypocrisy, it is a truth.

As we speak, the Minister's colleague is putting oil-fired central heating into council houses across the country so the Minister should not lecture us about fossil fuels.

Deputy McManus must allow the Minister to proceed.

I am not lecturing. I am identifying——

The Minister's colleague, the Minister for the Environment, Heritage and Local Government, is putting oil-fired central heating into low-income households. That is unsustainable and they will not be able to afford to pay for any——

I am not lecturing, I am simply seeking agreement on what the problem is.

The Minister should not talk to me about the problem.

That is the problem.

These people know what the problem is.

Identifying that as the problem demystifies the mystery of why diesel is more expensive. The reason diesel has been more expensive in recent times is that the demand for diesel globally is ahead of supply. It is because of events in China and other countries where it is being used in diesel generators because they are short of electricity. In Europe, it is because we are switching towards diesel cars. That is the reason diesel prices in every country have gone up.

That is backed up by the fundamental problem that we are approaching a peak in global oil production. We are not unaware of and are committed to protecting our people from fuel poverty in those circumstances in whatever way we can. I increased the budget in the warmer homes scheme from €2.5 million to €4 million to provide people with what is the only proper solution. This is insulating and reducing their use of the material as the best way of cutting back in their long-term spending.

The Minister should show me how.

The time for this question has expired.

My colleague, the Minister for the Environment, Heritage and Local Government, introduced a new housing aid for older people scheme last November which provides targeted support to improve conditions in existing housing for older people. These are real measures we are introducing but we cannot confuse the Irish people by not being clear and honest with them about what the fundamental problem is, which is a finite geological resource off which we must wean ourselves.

Joe McHugh


3 Deputy Joe McHugh asked the Minister for Communications, Energy and Natural Resources if he has had contact with the National Consumer Agency or with the Department of Enterprise Trade and Employment to address the high cost of diesel here; and if he will make a statement on the matter. [21646/08]

View answer

As I said in my reply to the previous question, the Irish oil industry is fully privatised, liberalised and deregulated. There is free entry into the market and prices at the pump for both petrol and diesel reflect market factors, notably global market price, transportation costs, euro-dollar fluctuations and other operating costs.

Traditionally, diesel has been less expensive than petrol at the forecourts in Ireland. This has been due to the fact that the international prices for both products were previously at a similar level and excise duty is lower on diesel. The international price of diesel has, however, increased because of a rising demand for diesel in Europe, as well as in China and other developing economies. European refineries have been unable to keep pace with the demand for diesel, which means that it has to be sourced from further afield, particularly Russia.

The International Energy Agency has also reported an over-supply of petrol in the market stemming from high production and high stocks of petrol in the US. This has curbed exports of petrol from Europe to the US, resulting in high stocks of petrol in Europe. The combination of these various market factors has contributed to the rise in diesel prices relative to petrol.

The increase in the price of diesel is affecting all of Europe. EU price figure comparisons published on 19 May 2008 show that the average price of diesel in Ireland in April was €1.24 per litre. This price ranks as the eighth cheapest price out of the 27 EU member states reported by the EU on 19 May. The average price of diesel in the UK in the same report was €1.56 per litre and the average EU price for diesel was €1.40 per litre. These comparisons demonstrate that Ireland is by no means the worst affected country in Europe in respect of the price of diesel.

My officials are in regular contact with the Department of Enterprise, Trade and Employment on a range of matters, given the clear relationships between energy policy, competitiveness and enterprise. Neither Department, however, has any role in respect of price control in the oil market. Price differences are an ongoing feature of the market economy and it is a matter for consumers to exercise choice.

Additional information not given on the floor of the House.

The Deputy will be aware that petrol stations are required to display their prices clearly so that consumers can make an informed choice. Consumer protection is a matter for the Department of Enterprise, Trade and Employment and consumers can report any infringements of the law in this regard to the National Consumer Agency.

The upward global trend in oil prices and the prospects of a peak and then decline in global oil production reinforces the imperative for Ireland to reduce its oil dependency and to use energy wisely and efficiently. The actions we are taking to accelerate delivery of our targets for renewable energy and energy efficiency are essential to ensure a sustainable energy future for the economy and consumers.

I will be brief this time and give the Minister some time to answer my question. I came into this job working from the basic premise of thinking globally and acting locally. The Government has gone completely askew. It is blaming global matters and doing nothing locally.

Everybody knows that diesel is €1.40 per litre. The Minister is trying to get people to use environmentally friendly fuels but it has completely backfired. There is a danger that people might start buying petrol cars. There are no incentives for hauliers who have bought environmentally friendly lorries in terms of reduced motor tax for complying with environmentally friendly regulations.

In respect of doing something locally and not blaming global matters, the Minister mentioned countries from the UK to China to the US. In terms of something local, we on this side of the House launched a proposal to reduce the VAT rate from 13.5% to 12.5%, which would affect goods like coal, gas and electricity products. What is the Minister's position in respect of this proposal? Will he consider bringing it to Cabinet because it will directly affect the matter referred to by Deputy McManus, namely, heating oil for people? We are talking about a figure of approximately €300 million that is going directly as a windfall tax to the electricity producers, which could go directly to the consumer. What is the Minister's position on this and will he consider the Fine Gael proposal launched yesterday?

I am happy to set out my position. I disagree with the Fine Gael approach. That is the same approach suggested by Hillary Clinton in the US which involves giving a gas holiday tax break. Fundamentally, it is leading our people in the wrong direction and does not recognise the fundamental problem. To pretend that we can get out of this by just cutting tax and that no finite resource issue exists is to get it wrong. Instead I would give back any such financial resources we have to the Irish people to give them the chance to reduce their use of fuel in terms of——

That is the proposal.

No, what Deputy McHugh is proposing is a tax reduction, what I am saying is that I would give the Irish people the ability to reduce their use through investing in energy efficiency measures and new renewable energy fuel supplies that will not be subject to future price increases. Fine Gael is engaged in a short-term gimmick that does not address the fundamental long-term problem. It does not get us out of our use of fossil fuels. It is attempting to solve a problem——

With all due respect, we have had ten years of wealth in this country which we have not redistributed into the area about which the Minister is talking.

The Minister is in order.

The consumer can benefit directly rather than having a windfall for the producers.

The market could quite easily gobble up any such VAT reduction the Deputy proposes should be put in place. It does not provide a fundamental long-term solution to the problem, which is our use of fossil fuels.

The long-term solution could have been found ten years ago.

The Minister is in possession.

That money can be valuably used in cutting people's use of fuel, in developing a role in local supplies so that we are protected from future oil and gas price shocks. That is the correct policy decision.

Apart from aspirations, what are the Minister's alternatives?

The decision proposed by the Deputy is a short-term gimmick that does not address the fundamental problem.

What about the loss to this sector during the ten years when we had wealth, which was wasted and squandered by the Government of the day?