By Pádraig Hoare
Irish motorists and homeowners are facing a “bleak winter” with the price of oil reaching a four-year high of $80 a barrel, with the potential to rise to $100 a barrel by the end of the year.
That was the warning of a consumer expert who said households and motorists would feel the pinch in petrol, diesel and home heating in the coming weeks.
Merrion economist Alan McQuaid’s outlook came as a fuel retailer body echoed the warning, saying any hike in road fuel duty coupled with escalating oil prices would hurt local economies.
Mr McQuaid said: “It looks like it will be a bleak winter for motorists and indeed households trying to heat their houses. Irrespective of what happens in the Budget, the short-term outlook for oil appears to point to higher prices.
“Oil prices could rise towards $100 per barrel towards the end of the year or by early 2019 as sanctions against Iran bite. Almost 2 million barrels per day (bpd) of crude could be taken out of the market as a result of the US sanctions against Iran by the end of the fourth quarter this year, making a crude price spike to $100 a barrel possible.”
He added: “Washington has already implemented financial sanctions against Iran and it plans to target the country’s oil exports from November 4, putting pressure on other countries to also cut Iranian crude imports.
“Oil prices have been rising since early 2017, when OPEC together with other suppliers including Russia started withholding output to lift crude values. Unplanned disruptions from Venezuela to Libya and Nigeria have further tightened the market just as global demand approaches 100 million bpd for the first time.”
The Irish Petrol Retailers Association (IPRA) said homeowners were already facing increased costs before the oil price was factored in.
Spokesman David Blevings said: “We are seeing pressure again on global oil prices due to a number of factors — the recent fallout at the OPEC meeting over attempts to increase supply, increased demand for oil and the continued aggression in the Middle East all continue to push the price of oil upwards with crude recently passing the $80 a barrel mark.
“Looking ahead to the Budget, we note that at the recent Project 2040 event Government representatives said they will part-fund public transport and energy efficiency under the National Development Plan with an increase in the cost of petrol, diesel, home heating oil, gas and briquettes.
"The IPRA has urged the Minister not to raise duty rates in road fuels this year due to the current high cost of oil as any increase could offset the local economic recovery which is well underway."
Brent crude climbed above $80 a barrel to its highest level since November 2014 after OPEC and its allies signalled less urgency to boost output, despite US pressure to temper prices.
OPEC and its partners gave a tepid response to President Donald Trump’s demand that rapid action be taken to reduce prices, saying they would boost output only if customers seek more cargoes. Brent could rise to $100 for the first time since 2014 as the market braces for the loss of Iranian supplies, according to analysts.
Oil has rallied since the lows of August as speculation swirls over whether OPEC will boost production.
Additional reporting Bloomberg
