'Second wave of price hikes' for Irish households and businesses after invasion of Ukraine

Increases in the price of crude oil will within days feed into the cost of petrol at forecourts

Ukrainian soldiers load the surviving equipment at a destroyed Ukrainian military facility outside Mariupol, Ukraine, on Thursday. The price of wholesale gas, oil, and coal, as well as world food prices and commodities, surged in response to the Russian invasion of Ukraine. Picture: AP Photo/Sergei Grits

Irish households and businesses face a second wave of price hikes after the price of wholesale gas, oil, and coal, as well as world food prices and commodities, surged in response to the Russian invasion of Ukraine, experts have warned. 

Thursday's increases in the price of crude oil, which at one stage jumped 9% past $100 a barrel for the first time since September 2014, will within days feed into the cost of petrol at forecourts. And the price of European wholesale gas, which influences the cost of generating electricity on the Irish grid, surged by 30%.         

Caroline Bain, chief commodities economist at Capital Economics, warned that further energy price increases may be on the way.               

"Brent crude oil is now trading at well above $100 per barrel, and we think concern about Russian supply will keep prices around this level over the next few months," Ms Bain said. "What’s more, if the situation were to escalate and Russia’s oil exports were choked off altogether, we could see oil prices trade in a range of $120–$140 per barrel." 

Russia accounts for about 10% of global crude oil exports, about 50% of European coal imports, and about 30% of European natural gas imports, analysts say. Alongside Ukraine, it is also a major exporter of food grains.               

Gas for delivery in June was trading at €118 per megawatt hour, up 30% in Thursday's session. 

"The most obvious implications of the events will be in the energy, and particularly the gas markets," said Kieran McQuinn, economics professor at the Economic and Social Research Institute. "It will probably lead to higher prices," he said.   

Economist Jim Power said the Ukraine war represents a second shock for prices across the economy. 

"You can only believe it can only get worse over the coming weeks," Mr Power said, as oil price increases are quickly passed onto motorists and household energy and utility bills rise further. 

'Cut fuel taxes'

There will be other "phenomenal" second-round effects because energy is so important in producing foodstuffs, Mr Power said. He said any new Government measures should be to cut fuel taxes.              

On global markets, the price of wheat rose sharply again, by almost 6% on Thursday, while rapeseed gained 3%. However, coffee prices, which have surged in recent weeks, fell. 

John Whelan, an expert on Irish and international trade, said that in 2014, when Russia seized Crimea, prices of agricultural products soared because Russia and Ukraine are big cereal exporters. 

"The cost of living is obviously going to go up and, for industry, it is a question of getting hold of the materials that they are going to need to keep factories going," Mr Whelan said. 

Aidan Flynn, chief executive for the Freight Transport Association Ireland, said trucking firms face huge challenges with costs. 

The business group is looking for a cut in excise duties on diesel to offset likely further increases in fuel.