Higher diesel costs could derail ‘go green’ plan

MOTORISTS are being punished by the cost of diesel just as the Government is encouraging motorists to buy diesel-powered cars to help the environment.

Finance Minister Brian Cowen is changing vehicle registration tax from July to reward car buyers who opt for diesel models, which are better for the environment than petrol vehicles.

But diesel has been costlier than petrol since December, and the widening gulf in prices threatens to derail Government plans to get motorists to go green.

“Every winter diesel is more expensive because of demand for home heating oil and the difference is usually gone by February,” said AA Ireland spokesman Conor Faughnan yesterday.

“But this year we have not seen that difference disappear and the same effect has been observed right across Europe.”

Diesel has been more expensive than petrol for the last four months in Ireland, with the price gap now at its widest for at least two years.

Of 25 European countries surveyed by the AA Ireland, 12 charge more for diesel than petrol.

In Ireland, diesel is around two cent per litre costlier than petrol yet in previous winters the difference was as little as a tenth of one cent.

Today consumers are shelling out €67.21 a time to fill up an average family car with a 55-litre tank. Petrol is €66.11 a tank.

A year ago consumers were paying just €57.31 for a tank of diesel and slightly more at €58.03 for petrol.

Yesterday, AA Ireland said the reason for the difference is a surplus of petrol on world markets and a shortage of diesel.

Oil companies last year thought demand for petrol would rise and boosted their output of petrol so they had to cut the amount of crude oil they refined into diesel.

But the economic slowdown in the US — where 40% of all supplies go — means less petrol is being used by motorists, leading to a surplus and falling prices.

“The abundance of petrol on world markets is keeping the price down compared to diesel, which is bearing the brunt of the rise in oil prices.”

The AA has ruled out fears that oil companies and forecourts were keeping Irish prices high so they could cash in on the expected boom in demand for diesel fuel from July.

Tax on a litre of diesel is just 3c lower than petrol but in other European countries the duty is even lower so diesel is less than petrol.

Today Mr Faughnan is to appear before an Oireachtas committee investigating price rises.

Yesterday the Irish Petroleum Industry Association said Europe was short of diesel and was having to import supplies, leading to price hikes.