Recession fears lead to drop in oil price

There may be a silver lining in the dreaded double dip recession as the price of crude oil fell to a three-month low on fears that a renewed recession will hit demand.

Speaking at the New Energy Era forum in Skibbereen, Co Cork, yesterday, petrologist Colin Campbell said the further oil spikes could trigger a fresh recession.

Mr Campbell was speaking as oil fell to a three-month low of $97.94 a barrel.

“Anything higher than that will trigger a new recession, which kills demand. The price of petrol is already high and at today’s prices is cutting demand. It’s not going to go through the ceiling,” he said.

His views were echoed on the forecourt, where Maxol chief executive Tom Noonan said the price was too high for consumers.

“We’ve noticed a reluctance among people to fill their tanks as it’s too damn expensive,” he said.

Mr Noonan was keen to point out that two-thirds of the cost the Irish consumer pays for fuel goes straight to the Government.

He said none of the Irish fuel importers were growing rich on the back of high cost at the petrol pumps. He said nearly 80% of Irish petrol retailers are now Irish-owned and if you look at their annual accounts “no one is making a fortune”.

Mr Noonan said Maxol do not buy crude oil, instead buying from the refined market. He said this market was often quite different to the crude market.

Petrol on the refined market usually rises at this time of the year due to the beginning of the US driving season, when people take to the roads for their summer holidays.

Oil is traded in dollars and Mr Noonan explained that the weak euro was pushing up the price of fuel, but admitted that if current trends continued the fall in crude would cancel out the weakening of the euro.

Another oil industry source said the main reason the price of fuel had been increasing recently was the EU embargo on the importation of Iranian oil.

“Exports of Iranian oil are thought to have declined by 300,000 barrels of oil a day so as a result there has been a tightening of the supply situation worldwide and increased prices.”

Mr Noonan said that as soon as they started buying petrol at lower prices they would be passing the savings on to the consumer.

Eoin Galvin, president of the Irish Haulers Association, pointed out that when the price of oil increased the price at the pumps followed suit. “When it goes up, it goes up overnight,” he said.

Mr Galvin said the haulers “would welcome any reduction in fuel costs. The cost of fuel is crippling our industry.”

Mr Galvin also called on the Government to introduce a rebate for haulers based on the international fuel cost index which would encourage government to monitor consumer fuel prices more closely.