The benefits for Irish consumers may be limited even as the price of crude oil fell yesterday, analysts said.
The plan by a number of oil-producing nations to curb supply fell apart over the weekend as Saudi Arabia and Iran — which had only recently started pumping oil again to Europe after an end to sanctions — failed to strike an agreement.
Brent crude slumped by over 7% at one stage, but ended the European trading session almost 3% lower, at $42 a barrel. It is 60% down from over a year ago but up from its 2003 low of $27, in February.
Yesterday’s limited price reaction suggests the worst is over for crude oil prices and that though Irish consumers and firms may enjoy the benefits of oil staying lower for longer that they are unlikely to tap huge benefits from now on.
Big falls in crude are not fully carried through to pump prices here for a number of reasons, including the large slice in excise and other taxes the government collects from oil.
Conall Mac Coille, chief economist at Davy Stockbrokers, said that crude oil prices could nonetheless creep higher, if Opec were to get a grip on supply.
Alan McQuaid, chief economist at Merrion Capital, said the slump had boosted the economy by putting “money into people’s pockets”.
Surprisingly, stock markets barely reacted to the crude price fall. Big oil firms and banks had dragged stock indices much lower as oil prices slumped at the start of the year.
“In short, it suggests that the price we pay at the pump and to heat our homes is set to remain low for an even longer period,” said David Donnelly, senior investment analyst at Cantor Fitzgerald Ireland.
“Moreover, at circa $45 marginal producers like US shale become profitable again, essentially placing a ceiling on oil prices in the near term.”
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