Motorists Can’t Afford Further Tax Hikes As Pump Prices Climb, AA Warns

Ahead of Budget 2020, AA Ireland has cautioned against further increases in taxation on petrol and diesel, as the latest increase in pump prices places further strain on motorists across the country.

The AA’s latest fuel prices survey has found that the cost of a litre of petrol has increased by almost 3.5c in the past month, increasing from 141.3c to the current average nationwide price of 144.7c. Meanwhile, diesel car owners received slightly worse news as the average price of a litre of diesel has climbed by almost 3c to a current level of 134.4c.

Increases were expected this month on foot of the Saudi drone attacks* and subsequent rise in world oil prices. In fact the increase is at the lower end of what had been feared, but the AA points out that prices have been rising since well before the Saudi story.

“Oil prices fell sharply at the end of last year and Irish fuel prices dropped as well.” Says Director of Consumer Affairs Conor Faughnan. “Since then they have risen every month and are at an 11-month high at the moment. Unfortunately, the trend appears to be in the wrong direction based on world oil prices.”

The AA has warned that increases to fuel taxes in the budget, likely to be packaged as a climate change measure, are unlikely to improve Ireland’s carbon footprint in the absence of alternatives.

“Carbon taxes are designed to ‘nudge’ consumer behaviour towards alternatives which is the while point.” Says Faughnan. “When you don’t have alternatives you don’t get the switch but you do get lots of extra tax money from consumers. I’m afraid its very cynical of the government which understands this point perfectly well.”

According to the AA’s fuel price analysis, over 60% of the cost of a litre of petrol is currently made up of taxation, with over 55% of the cost of a litre of diesel consisting of tax. According to statistics from the European Environment Agency, Ireland currently has the 11^th highest rate of excise duty on petrol within the EU-28 and the 8^th highest rate on diesel.

“A carbon tax on its own will not change commuter behaviour and will only be viewed by many as a cash grab unless you offer some form of a carrot to facilitate those who move to cleaner forms of transport along with the stick that is additional taxation,” Faughnan added. “If you look at Irish car sales statistics you’ll see that when tax incentives were introduced to push people towards diesel cars, the public responded and increasing numbers made the change from petrol to diesel. We may now look at that decision to push diesel as a mistake, but it does show that if you introduce incentives to move people from one form of transport to another, the average motorist will follow suit.”

“Whether it is a diesel-to-electric scrappage scheme, additional grants for electric vehicles or whatever form the government wants these incentives to take, these efforts will contribute much more greatly to Ireland reaching its climate targets then simply adding new taxes will ever achieve.”

*  Crude oil with prices remaining highly volatile in the aftermath of attacks on Saudi Arabian facilities. In the immediate aftermath of the attacks Brent Crude Oil prices spiked to almost $70 per barrel before dropping to a current level of $63-$65. However, this price still remains significantly above the prices of approximately $58 a barrel in late-August. Within the past month, the cost of a barrel of crude oil has risen from approximately $62 to a current rate of between $66 and $69.