Global oil prices are shooting up toward pre-pandemic levels and are set to add to costs for Irish businesses and motorists at the worst possible time, experts have warned.
The price of benchmark Brent crude oil climbed yesterday to $56.50 (€46.30) a barrel, close to its level in Feburay before the onset of the Covid-19 crisis sent demand for oil spiralling downward.
The benchmark crude oil price had fallen as low as $19 a barrel, during the first of the lockdowns across the world, in April.
The price has since surged from $37.50 a barrel at the start of November, as the start of the approval of the first vaccines boosted hopes for a resurgent world economy this year.
The price of crude oil also jumped significantly in recent days as Saudi Arabia unexpectedly announced production cuts.
The implications for Irish businesses, and food processing firms in particular as big energy users, as well as Irish motorists, are clear.
It takes about two or three weeks for the price of wholesale crude oil to pass through to Irish pump prices and fuel costs, as tracked by distilled oil tankers at Rotterdam Port.
Dermot O'Leary, chief economist at Goodbody, said that crude oil prices had risen to reflect investors' views that the vaccines will significantly boost the global economy and bring back some sort of level of normality this year.
Barry Aldworth at AA Ireland said that pump prices would increase into February, if crude oil prices remained at current levels.
In December, petrol was selling at an average price of €1.27 a litre and at €1.19 for diesel, compared with €1.42 and €1.33 before the crisis in February, according to AA figures.
Mr Aldworth said that anecdotal evidence suggested that prices in the first weeks of this month had crept higher above December's levels.
Aidan Flynn, general manager of Freight Transport Association Ireland, a business group for hauliers, said that a third of hauliers' costs are accounted for by the price of fuel.
However, many transport companies had not, paradoxically, benefited from the low fuel costs last year, as global prices crashed, because drivers were clocking up much less mileage during the lockdowns than any normal year.
Mr Flynn said that hauliers had also failed to benefit from a Revenue rebates scheme because prices and mileage had been at exceptionally low levels last year.
Bloomberg reported that global crude oil prices have been on a tear after Opec and its allies agreed to keep curbing their output, building on a rally at the end of last year amid optimism on Covid-19 vaccine breakthroughs.
Recent democrat victories in US elections have also spurred hopes of economic stimulus.
“Oil prices are rebounding again this morning as aggressive buyers emerge following the recent bullish oil calls from some of the larger and more prominent US investment banks,” said Ryan Fitzmaurice, commodities strategist at Rabobank.
Still, “spot oil prices have soared", with the relative strength index also flashing warning signals to the bulls, Mr Fitzmaurice said.