US-Iran war eroding Cork county road budget by nearly €50m

Padraig Barrett said inflation will eat into the €240m earmarked for Cork roads, currently estimating it will run from anywhere between 10% and 20%.

Inflation in fuel prices and oil-based construction materials caused by the US-Iran war could cut into the Cork county roads budget by up to 20%, or nearly €50m.

That is according to Cork County Council's director of roads and transportation Padraig Barrett, who outlined the stark estimates in firm figures after previously warning of the looming threat.

The council has received €240m from the government for road projects in the county this year. 

Mr Barrett said inflation will eat into what can be achieved, and he is currently estimating it will run from anywhere between 10% and 20%.

He told the Irish Examiner that if the war drags on, the inflation estimate could be in the 15% to 20% range as soon as the middle of the summer.,]

“Tarmacadam is the big issue as it is oil-based,” Mr Barrett said.

He added that contractors are also allowed to claim additional money from the local authority for unforeseen increases in fuel costs, on top of their original accepted tender.

“I’m hoping the inflation costs will be on the lower side of what I’m predicting, especially if the war finishes early. 

"But if it drags on, it could well be at the higher end. It is a concern, and we are keeping a very close eye on it,” Mr Barrett said.

US president Donald Trump said over the weekend that the US and Iran are close to a deal. However, the warring nations have seemingly been on the cusp of progress over the past two months, only for it to go back to square one in the following days, leading to roiling oil markets globally.

Mr Barrett said increased inflation warnings from contractors started to be noticed by the council at the end of February, and by the end of March, the local authority started getting letters about it.

Council engineers representing the Carrigaline Municipal District warned local councillors that they have recently seen tenders coming in for small roads projects at 33% above what was previously the norm.

They said they are in talks with the council’s Sustainable Travel Unit (STU) to see if they can get more funding from it to offset the inflation rises.

They said they are now reviewing these tenders, some of which are for the construction of speed ramps for traffic calming projects.

Most contractors are still using vehicles which run on petrol and diesel. However, while the council has a huge fleet of vehicles, Mr Barrett said that a quarter of its HGVs have been converted to using Hydrotreated Vegetable Oil (HGO), which is more environmentally friendly and the price of which has not been impacted by the US-Iran war.

It is understood that other council directorates are also looking carefully at inflation figures. Apart from the roads and transportation directorate, the housing directorate could also be hit by the impacts due to increases in labour costs and construction materials.