Diesel and petrol set to rise by 4c a litre

THE cost of petrol and diesel is set to rise by about 4c per litre by next January as a result of the combined effect of increases in VAT and carbon tax announced in yesterday’s budget.

Motorists experienced the immediate effect of an increase in carbon tax on fossil fuels from €15 per tonne to €20 per tonne from midnight last night as it resulted in the average cost of a litre of petrol rising by 1.4c and diesel by 1.6c.

The imposition of the higher VAT rate of 23% from January 1 will add another 2.44c per litre on both petrol and diesel. The effect of increases in both VAT and carbon tax will see the cost of a litre of both fuels jump by 4c on pre-budget prices from the start of 2012.

AA Ireland claimed the budgetary measures would add €6 per month to fuel costs for the average motorist.

Spokesman Conor Faughnan described the increases as a “tactical mistake” which could actually cost the Government money.

He said the exchequer had been boosted by cross-border sales in recent years as a result of having cheaper fuel than the North — an advantage that was now being eroded.

He claimed the fuel price increases would have the biggest impact on motorists in rural Ireland, who have higher average mileage and fewer transport alternatives.

Mr Faughnan predicted the increases would also result in reduced fuel sales — which have already declined by 6% this year — falling commercial activity and less money in circulation.

The Irish Road Haulage Association said the increases, combined with the failure to introduce a rebate system, would add further to the growing problem of illegal diesel laundering.

The Coach Tourism and & Transport Council of Ireland said the price rises would “add another nail to the coffin of the coach tourism sector”.