Fuelling a whole new crisis
The soaring cost of petrol and diesel is threatening to do severe damage to the economy at a time when it is least able to absorb such a blow. Crude oil prices have risen by almost $20 a barrel over the past two months and motorists have also been clobbered by the fall in the value of the euro against the dollar, the currency in which oil is priced.
According to the AA, which monitors fuel prices, the average price of a litre of petrol is now €1.63 while a litre of diesel now costs €1.54. In fact, the AA figures have been overtaken by events with most service stations now charging €1.70 or more for a litre of petrol and €1.60 for diesel. This compares with the €1.17 for a litre of petrol and just €1.05 for a litre of diesel which motorists were paying as recently as August 2009.
With the price of filling the tank of the average family car now rapidly closing in on €100 there is mounting evidence that motorists are cutting back on their mileage. The volume of fuel sales has fallen by over 7pc over the past 12 months and by almost a quarter since 2008. While the recession has certainly played a part in the fall in fuel sales, record prices almost certainly provide the main explanation.
Odometer readings by motoring bodies aimed at stamping out "clocking" also indicate a drastic reduction in the mileage done by most drivers with the average petrol-engined car now doing less than 9,500 miles per year, down by over 1,300 miles since 2010.
With the bulk of passenger and goods traffic going by road it isn't just private motorists who are being hammered by record fuel prices. Hauliers, taximen and coach operators are also suffering badly.
And who is responsible for this sorry situation? Dearer crude oil is certainly part of the problem but, even at its current price, crude oil still represents only a third of the retail cost of motor fuel. The main culprit is of course the Government, with excise duties and VAT making up half the price of diesel at the pumps and well over half the price of petrol.
This of course means that calls on the Government to reduce fuel prices by cutting taxes will be met with replies that it can't afford to lose the revenue which they bring in. Nonsense. Even with a 4c increase in petrol and diesel duties in last December's Budget, the Government's total revenue from excise duties was flat for the first seven months of the year.
It should be clear that, when it comes to excise duties on motor fuel, the Government has passed the point of diminishing marginal returns. Finance Minister Michael Noonan should cut our excessive fuel duties before they inflict even further damage on the economy.