The surge in fuel prices which saw the average cost of a litre of diesel top €1.60 is likely to represent a tipping point for many road users, especially in the haulage industry.
The latest price change represents an annual increase of 11.5% in the cost of diesel over the past 12 months and a 53% increase since Aug 2009 when a litre of diesel averaged €1.04.
Against such a background, the announcement by Target Express that it had ceased trading with the expected loss of almost 400 jobs came as no major surprise to those working in the haulage trade.
The Irish Road Haulage Association has, in the past few years, repeatedly issued warnings to the Government that the industry was in crisis as a result of massive inflation in fuel prices combined with the related and growing problem of illegal diesel use.
The IRHA claims fuel accounted for 30% of the average haulage costs up to a few years ago, but the figure now stood at 50% — a rate described as “unsustainable”.
The organisation maintains the industry has shrunk by 20% since 2010 with the loss of 5,000 jobs.
In a pre-budget submission made last year, the IRHA estimated that the exchequer was losing €200m per annum due to the scale of the problem as hard-pressed hauliers resorted to one of two options to acquire cheaper fuel — buying diesel while on trips abroad or sourcing illegal “washed” diesel.
For each haulier who refuels on the Continent, the Government stands to lose about €650 in excise duty, according to the IRHA. In a similar fashion, the exchequer is also losing an estimated €50m in tax and excise as a result of hauliers switching to the illegal use of cheaper agricultural or washed diesel — a problem which is particularly acute in border counties where the trade is controlled by former republican paramilitaries.
Agricultural diesel costs 40c per litre less than standard diesel.
It is estimated that 120 petrol stations are engaged in the illegal sale of laundered diesel with about 12% of all diesel used in vehicles in the Republic being sold on the black market at a total loss of €150m to the exchequer.
The Government has resisted growing pressure to address both issues which the IRHA strongly believes could be resolved through the introduction of rebate schemes.
In the first attempt to tackle the illegal practice of washing agricultural diesel which is marked with a distinctive green dye, the Revenue Commissioners are introducing a new register for outlets selling agricultural (green) diesel from Oct 1.
“It’s a move in the right direction but a much better system would be to sell both types of diesel at the same price with a rebate scheme for legitimate end users, while introducing a register for the purchasers of agricultural diesel,” says IRHA president Eoin Gavin.
However, the IRHA’s proposals are being resisted by farming organisations and state agencies which believe that such a scheme would create a major administrative burden.
More importantly, the IRHA argues a fuel tax rebate scheme is needed to discourage the practice of “tank tourism” where long distance hauliers opt to buy all their diesel abroad. Such rebate schemes are common in many other European countries where they are regarded as a net benefit rather than a cost.
A high-level working group established by Finance Minister Michael Noonan last February saw deep divisions between the IRHA representatives and Department of Finance civil servants on the benefits of a rebate scheme.
However, Mr Gavin is adamant it would “stem the job losses in the sector, make Ireland’s exports more competitive, [and] reduce the criminality and environmental damage caused by washed fuel”.
“It will, at worst, be revenue neutral and could contribute, at best, over €100m to the exchequer.”
Meanwhile, industry sources claim many hauliers are relying on Vat receipts to get them through cash-flow difficulties as many operate on a 90-day credit system with their customers — a practice discouraged by Revenue.
The Government has ruled out adopting a French initiative to cut fuel prices by 6c per litre for at least three months to help motorists.
If the finance minister fails to introduce some measures to alleviate mounting fuel costs in the budget in December, many more hauliers — some of whom are ready to take direct protest action — could soon run out of road.
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