Pump prices have hit a five-year low

The average price of a litre of petrol or diesel is cheaper now than at any time since March 2010 according to the AA’s Fuel Price Index. Petrol now costs an average of 129.5 cent; 12.9 cent cheaper than it was this time last year. Diesel prices also tumbled and are now at 118.2 cent, 15.8 cent down on last Christmas.

AA Director of  Consumer Affairs, Conor Faughnan has this to say: “The global collapse of oil prices may be good news but we are not feeling the full benefit of it at the pump for two reasons. Firstly, the Euro has weakened against the Dollar. Secondly, we are still stuck with paying enormously high fuel taxes imposed during the financial crisis and stubbornly retained by the Government.”

The falling price of oil internationally has been dramatic since the middle of last year when it was holding above US$100 per barrel. It is now trading at a little over US$36. But that two-third fall does not translate into a two-third reduction rate in pump prices for Irish motorists.

Oil is bought in US Dollars so the Irish price is dependent on the relative strength of the Euro. The single currency has dropped by 20% against the dollar since the middle of last year: from 73.5 cent to the dollar in July 2014 to 91 cent in December 2015.

Fuel taxes in Ireland are charged by the litre so when the price falls, taxes do not.[1] Starting with the emergency budget of October 2008, there were five separate tax increases on fuel between then and 2012 which added about 20 cent and 18 cent to a litre of petrol and diesel, respectively.

The AA believes this is an anti-stimulus measure and is effectively taking money out of the pockets of motorists.

The effect is that 91 cent of the price paid for a litre of petrol is tax and 77 cent of the price of diesel is tax.

 Conor: “If it weren’t for these emergency era taxes we would be looking at about 109.72 cent for petrol and 100.52 cent for diesel and would potentially save about €403 and €360 [2] on motorists’ petrol and diesel bills each year. There’s no reason why these taxes shouldn’t be removed – the emergency is over and so is the time for emergency taxes.”

Conor predicts what 2016 has in store for fuel:

If oil continues its current pattern, we could see fuel prices continue to fall well into 2016. Because fuel taxation is already worth an estimated €2 billion to the Irish exchequer, looking to the year ahead we would like to see the Irish government remove those extra taxes and put the money back into motorists’ pockets.”

[1] Apart from VAT at 23% which is charged on top of Excise duty & Carbon tax.
[2] The AA calculates that the amount of taxes added to petrol and diesel between 2008 and 2012 is 19.777c and 17.670c per litre. If a car does 12,000 miles per year at 30 miles per gallon (19,200 kilometres at 9.42 litres per 100 kms) it will therefore use 2,038 litres per year.

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