Update: Reduction in Oil Prices – Communications, Energy & Natural Resources 23rd October, 2014

[Ref No.: 40327/14]

 To ask the Minister for Communications, Energy and Natural Resources the extent to which oil companies have passed on to the consumer the benefit of the substantial drop in world oil prices; if in consultation with the energy regulator, he may be in a position to encourage a reduction in oil prices in line with those on world markets; if any evaluation has been done as to the potential economic benefit to this country’s economy arising from energy price reduction; and if he will make a statement on the matter. – Bernard J. Durkan.

For ORAL answer on Thursday, 23rd October, 2014.

(13  Received on 16th October, 2014.)

REPLY

Minister for Communications, Energy and Natural Resources (Deputy Alex White)
The Irish oil industry is fully privatised, liberalised and deregulated and there is free entry to the market. There is no price control in the oil sector and it is Government policy to encourage price competition and consumer choice.

The Commission for Energy Regulation has no statutory function in the regulation of petrol and diesel prices. The Maximum Prices Order was removed in 1991 and the market was deregulated. Similarly, I have no statutory function in the setting of oil, petrol or diesel prices. The price paid at the pump by consumers is largely determined by taxation levels, the internationally traded price of crude oil and the consequent price at which refined product is traded in Europe, along with the level of competition in the retail market.

Oil has been virtually eliminated from the power sector in Ireland (1% of power was oil generated in 2012) and its main use is in transport and home heating. 100% of oil used in Ireland is imported. Home heating oil prices paid by consumers reflect volatile market prices, transportation costs, trends in exchange rates and other operating costs along with taxation.

The Irish Petroleum Industry Association have noted in their publication What determines pump prices?  that while the long-term trend in the price of crude oil has generally had an effect on the price of refined products, the pressures of supply and demand for refined products have tended to lag those of crude oil and can be affected by other forces.

The National Consumer Agency has specific responsibilities for protecting the rights of consumers. In December 2008, the National Consumer Agency published an Investigation into Petrol and Diesel Price Movements  which concluded that:  “ There is little evidence to suggest unwarranted delays in the passing on of wholesale price changes to the consumer at the pump. Direct comparison between fluctuations in crude oil prices and petrol and diesel pump prices is inappropriate and does not reflect the reality of the petrol and diesel supply chain. €¦.Examination of the accounts of the larger oil companies in Ireland suggest there is relatively modest profit to be made in the downstream supply of refined oil products .”