€5-a-litre petrol in the pipeline for motorists, warns expert

MOTORISTS could face the prospect of paying €5 a litre for petrol within the next four years because of global oil shortages.

The claim was made at a University of Limerick’s Science lecture series yesterday after a petroleum reserves expert Matthew Simmons warned that the world had allowed itself to drift into a benign energy war.

Another expert, Professor Austin Darragh, University of Limerick, said some predictions would suggest that oil could cost as much as €5 a litre before 2010.

“We hope that such will not come to pass, but certainly the trend will be in that direction,” he said.

Matthew Simmons, chairman of Simmons and Co International, said global oil demand has grown by 15 million barrels a day (mbpd) in the past decade to the present level of 90 mbpd.

Production peaked in continental USA at 10 mbpd in December, 1970. Now, it is three mbpd. By 2010 production will have fallen to two mbpd. If present trends continue, the global demand for oil will reach 120 mbpd by 2020.

Meanwhile, the Irish Small and Medium Enterprises Association (ISME) said increases in the price of oil were unsustainable and could have a “catastrophic” effect on the economy.

ISME chief executive Mark Fielding said that jobs could be put at risk because of the crisis, particularly in the manufacturing sector.

He said small businesses had already faced exorbitant increases in energy costs in recent years, including a 51% increase in electricity, a 46% increase in gas and a 43% increase in petrol and diesel since 2002.

He called on the Government to implement a national energy policy as soon as possible to deal with the pressures wrought by climbing oil prices. “While the Government can do little to influence international oil prices, it does have the power to influence the cost of other business inputs, including electricity and gas, and to implement initiatives to increase the usage of alternative energy sources such as bio-fuel, solar and wind energy.”

Chief executive of the Irish Petrol Retailers Association Oliver Lupton called for the establishment of a national forum between interested groups such as the Government, road hauliers, petrol retailers and oil companies so as to decide on an economic price for fuel.

The number of petrol retailers has fallen from 2,200 to 1,700 in the past three years and the sector expects a further 400 stations to close in the next two years as profit margins fall.

Mr Lupton said that, as the Government has taken e1.2m a week in recent weeks as a result of VAT and excise on fuel, it should do more to ensure that vulnerable sections of the economy are safeguarded against uncertainty in the market as a result of rising oil prices.

Global reserves expert Simmons also said expensive oil will not create economic collapse. He said his concern was that a shortage could be created by wasteful overuse of low-cost oil and that yesterday’s $74 a barrel high was good news.

“The bad news would be a collapse of oil prices - $74 a barrel is just over ten cents a cup. Almost everything we buy in stores in liquid we buy by the cup. As far as I know the only thing left in the world we sell at less than 20 cents a cup is crude oil to refineries.”

He said the price of oil needs to go way up and as it does so it will help people adjust lifestyles and not use oil so carelessly. When raw materials go up in value, it creates a lot of money in a lot of poor countries and these countries spend this to improve poverty levels.