Tuesday 14 August 2018

Explainer: Everything you need to know about petrol and diesel prices increase

Motorist line-up for gasoline at a Costco gas station in the aftermath of Hurricane Harvey in Cedar Park, Texas, U.S., September 1, 2017. REUTERS/Mohammad Khursheed
Motorist line-up for gasoline at a Costco gas station in the aftermath of Hurricane Harvey in Cedar Park, Texas, U.S., September 1, 2017. REUTERS/Mohammad Khursheed
Charlie Weston

Charlie Weston

Petrol and diesel prices at the pumps are to rise next week due to the impact of Hurricane Harvey.

Here is everything you need to know about the expected price rise.

What is happening?

The Irish Petrol Retailers' Association (IPRA) has warned drivers to expect hikes of up to 3c per litre next week.

Petrol retailers defended the speed with which they are passing on the higher prices.

In the past they have been accused of waiting months before reducing prices at the pumps when crude oil costs fall.

Why are prices rising?

A number of oil refineries in Texas have been knocked out of action in the havoc wrought by the tropical storm.

This is having a knock-on effect in Europe, as it has pushed up wholesale prices.

In the states, President Donald Trump has sent politicians a 7.9 billion dollar (£6.1 billion) request for an initial down payment for Harvey relief and recovery efforts. The storm has been described as unprecedented.

What kind of price increases are we talking about?

Michael Griffin, of the IPRA, said his members would be hit with increases which they would have to pass on.

"It will be between 2c and 3c when VAT is included," he said.

The higher prices were likely to be seen in petrol forecourts from the middle of next week, he said.

Higher prices will mean a car owner with a typical 50-litre tank can expect to pay an extra €1.50 to €2 for each full refill.

Why are retailers quick to put up prices, but slow to pass on falls in costs?

Asked why retailers were quick to put up prices but slow to pass on falls in wholesale costs to drivers, Michael Griffin, of the IPRA said most retailers ordered petrol twice a week and the oil suppliers put up prices immediately for them.

The IPRA added: "Global oil prices have risen this week and this is due to downed refineries tightening supplies in the US Gulf coast and the Atlantic coast.

"This causes a ripple effect and wholesale markets moved up in response. This is a short-term blip and while we may see a short-term increase of a few cent per litre over the next week retailers have no option but to increase retail prices as the wholesale price is increased to them."

Will prices ever decrease again?

IPRA's Mr Griffin said once the US refineries are back in action prices should fall back.

The average price of a litre of petrol was 132.4c last month, the latest survey from AA Ireland shows. Diesel has an average price of 119.7c.

Prices at the pumps have remained roughly the same over the last year, AA Ireland's Conor Faughnan said.

"I am surprised retailers are putting up prices in the next few days. Hopefully, this will be a short-term rise," Mr Faughnan said.

Up to now, muted fuel price rises had helped to keep the cost of running a car down this year, the AA said.

What next?

This year's fall in the value of the US dollar has helped to lessen the impact of crude price rises in Europe.

Almost a third of oil refineries in Texas have been affected by the storm, with a major pipeline also out of action. One of the biggest refineries, the Saudi-owned Motiva refinery in Port Arthur, Texas, could be out for weeks.

In response to this, some European refineries have switched to processing US motor fuel, while crude prices have also risen. This has combined to send prices up in Ireland.

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