Knock-on effect of gas hike
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A WORRYING aspect of the proposed increase in the cost of gas to the consumer is its potential inflationary effect. Even now, a combination of rising interest rates and energy prices means that a fall in the official inflation rate, with prices rising by "only" 4.3pc in the year to April compared to 5pc in the year to March, will soon be reversed.
Although it is quite substantial, the proposed increase on its own may not contribute greatly, but consider the effect of a simultaneous increase in the price of heating oil together with knock-ons such as transport costs.
This at a time when the Government must seek pay restraint.
Another problem of national significance is the 60,000 Irish households who are in persistent "fuel poverty". That is, they spend more than 10pc of income heating a home of perhaps sub-standard quality.
The economic slowdown and rising food prices are already hurting people who have little or no income. The Society of St Vincent de Paul has seen a jump of 70pc in the number of requests for help in recent months.
A hefty increase in the price of fuel would be yet another blow.
Sad to say, the high price of wholesale gas which has forced Bord Gais to seek the rise is not entirely due to simple laws of supply and demand. Speculators who buy and sell on a massive scale, purely for quick profit, have caused wild fluctuations in gas prices and undermined confidence in supply.
Moreover, to put privatisation and healthy competition to one side for a moment, it has to be asked why the country's two major energy suppliers are investing independently in similar diversifications, such as wind farms. Bord Gais is to invest some €2bn over the next six years; the ESB will spend €3.5bn between now and 2012.
Surely there is scope for some rationalisation which might save the taxpayer some money and the consumer some grief.
Bord Gais is negotiating with the Commission of Energy Regulation for permission to raise its prices by 17pc to 19pc from next October. The Regulator has never turned down such a request from the board and is unlikely to do so now.
So the best we can hope for is that the world energy market will take a turn for the better in the next five months.
