Energy costs - Cold winter lurks as prices soar

BELEAGUERED consumers have good reason to brace themselves for the worst as the price of oil, electricity and gas soar in the aftermath of Hurricane Katrina.

Fuelling an already volatile situation, the price of gas in Ireland is set to escalate by over 25% with electricity increasing by over 4%. Ominously, the cost of crude oil went up yesterday for the second day running, confirming fears that the coming winter will bring the highest energy costs for a decade.

In this dire scenario, it is deplorable that customers are being ripped off at petrol stations where charges have soared to a whopping €1.30 a litre. There can be no excuse for such exorbitant prices.

With many stations charging exactly the same price, there is a strong case for the Competition Authority to find out whether or not a cartel is operating.

Thanks to Katrina, household energy bills will go on rising. In addition to higher gas and electricity charges, home heating oil is also becoming ever more expensive. While everyone will be hit, people on social welfare will suffer most and are facing a cold winter.

Globally, OECD countries will next week review the impact on supplies in the Gulf of Mexico where output could be set back for months to come.

Domestically, the crisis is having repercussions in the engine room of Ireland’s economy as cost increases bite deeper and industry becomes less competitive. Around the country, farmers and commercial fishermen are clamouring for aid while angry truckers have threatened to mount a French-style blockade at main ports.

Against this uncertain backdrop, there is urgent need for the Coalition to take swift action to alleviate the heavy burden bearing down on every consumer in the Republic.

With over 60% of the retail price of petrol going to the Exchequer, the Government should put a ceiling on the amount of tax it is automatically raking off every increase in the price of petrol, diesel and fuel oil.

Though excise duty is fixed at 44.2 cent a litre, the Government takes in an extra 21% in VAT which also applies to every price increase.

As a result of rising prices, according to the AA, the Government will take around €50 million extra this year.

More increases are expected following yesterday’s rise in the price of Brent North Sea crude for October delivery, a jump of 70 cents to $63.78 a barrel. That adds considerable weight to Fine Gael’s call for a temporary cap on VAT and excise duty.

It is hypocritical of Coalition backbenchers to wring their hands over price hikes when the administration goes on creaming extra revenue from the rising cost of carbon products.

With an election looming in less than 18 months, the voters will not thank politicians for sitting on their hands. Especially, when they could take positive steps to help soften the crushing effect of the oil crisis on consumers.

It is within the Government’s power to minimise the negative effects of soaring petrol and diesel costs. With the economy under pressure, there is an onus on Taoiseach Bertie Ahern to give decisive leadership.

At the stroke of a pen Finance Minister Brian Cowen could waive the additional tax revenue which the Exchequer is deriving from every surge in oil prices.

In other words, the minister is literally reaping a bonanza in unplanned revenue. With discontent growing among consumers, the Government may yet be perceived as putting fishermen and farmers out of business, sending employers to the wall, and making it ever more expensive for tens of thousands of people to travel to and from work.