Scarcely a day goes by without news of another energy company planning huge price hikes, usually in double-digit percentages. Problems of supply, compounded by Russia’s invasion of Ukraine, are posited as an understandable justification at first glance.
However, against that, Irish people – many of them dreading their winter fuel bills – will also be alarmed by news of these same companies’ hefty increases in profits.
Back in the first quarter of this year, ESB posted record profits while remitting a large dividend to state coffers. This week, we reported that Bórd Gáis’s profits rose by 74pc in the first half of the year. At the same time, we are learning that profits for Europe’s biggest oil companies, Shell and TotalEnergies, are beating all records.
This profit-rising trend has caused many opposition politicians to call for energy price caps that have been imposed elsewhere. There has also been serious government consideration of a windfall tax on energy companies.
The French minority government’s left-wing opponents only narrowly lost a vote this week that would have paved the way for an energy company windfall tax. The Paris administration has already granted large rebates on fuel taxes, making petrol and diesel markedly cheaper than in Ireland.
The French government has voted through €20bn of inflation-relief measures over the past 10 days. These include fuel subsidies, salary increases for state employees and scrapping of the television licence, funding broadcasters instead through a VAT levy.
French finance minister Bruno Le Maire has publicly urged energy companies to voluntarily cut prices rather than risk a future windfall tax. In the UK, opinion is divided on the issue, and the confusion is compounded by a noisy and closely contested campaign for the Conservative Party leadership.
Front-runner Liz Truss has ruled out any question of an energy windfall tax. She said such a move would “send the wrong message” to the world, adding that the government should be encouraging Shell and other companies to invest in the UK.
Her rival, Rishi Sunak, did unveil plans for a windfall tax some weeks ago when he was still chancellor. Mr Sunak said energy firms that invested in British oil and gas exploration could get windfall exemptions of up to 90pc. He estimated the windfall profit levy could contribute handsomely toward fuel subsidy measures, although the fate of this measure appears uncertain.
For poorer Irish families facing a nervous winter, there are grounds for arguing in favour of both these measures of price caps and/or windfall taxes on energy firms.
However, it would be well to look very closely at what is happening elsewhere before the Government takes actions that could make matters worse.