Rise in fuel prices is ‘damaging exports’

FUEL prices in Ireland are now one of the highest in Europe, having increased 26% since this time last year.

The Irish Exporters’ Association (IEA) said fuel price inflation in damaging export growth.

According to the IEA, diesel prices in Ireland are at 121.03c per litre, second to Britain at 136.04c. The cheapest diesel in Europe can be found in Luxembourg at 103.58c followed by Spain at 104.92c.

IEA chief executive John Whelan said the escalating fuel prices are the leading element in export business input cost inflation, which is running at 5%-6%

“Diesel cost inflation has added €€200 million to the export cost base of manufacturing industry in Ireland and has eaten into the competitive cost gains achieved through cost reductions over the past two years.

“We need to box clever in maintaining our export competitiveness. In France the government has introduced special user rebate for diesel, which effectively is a support for their export industry.”

He said the Government here needs to do the same, to ensure a return to maximum export growth.

The IEA said that a detailed programme on a special user rebate for diesel users has been sent to the Departments of Finance and Transport.

The group said input cost inflation was of “high concern” to export businesses in the manufacturing sector where input cost was now at an annualised rate of 5%-6%, but for food and drink consumer goods, input cost inflation was 9%-11% driven by rapid commodity price increases in sugar and grain.

Last week economist Nouriel Roubini said an increase in oil prices to $140 a barrel will cause some advanced economies to slip back into recession.

“If you have the oil price going up to where it was in the summer of 2008, at $140 a barrel, at that point some of the advanced economies will start to double dip,” he said.

There are fears that rising diesel and petrol prices will not only hit hard-pressed consumers but businesses struggling to survive. Many petrol stations are already charging more than €1.50 a litre.

Oil prices fell yesterday in the wake of the deepening nuclear crisis in Japan. Oil demand from Japan, the world’s third-largest user, is likely to decline in the short term as manufacturing and transport slow but could then rise as the country seeks to replace nuclear with oil-fired power during reconstruction efforts.

Oil markets were also keeping a close eye on developments in the Middle East.