Issue 9, Vol 5 Out Now
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Featured Article
| International selection |
Innovative low energy construction is rarely recognised on a European
scale. The Isover Energy Efficiency Awards are one exception — here are
nominations from across the continent that were celebrated at the
European awards ceremony in Barcelona on 2 June
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Official magazine of Easca  |
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Oil alternatives |
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Tuesday, 15 November 2011 |
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Page 1 of 3
With oil prices remaining at ominously high levels in spite of sluggish economic growth figures and efforts by the International Energy Agency to release additional capacity, Ireland must act fast to cut oil usage. Why then, has the government withdrawn grants for renewables while continuing to subsidise oil and gas boilers?
The average household needs to find an additional €950 during 2011 to cover energy bills as higher oil prices are passed on by wholesalers and retailers. But must the steady rise in oil prices really have such stark implications for every home? And what should government be doing about it?
Having averaged $85 a barrel over the course of 2010, oil is now trading at $110 to $115 a barrel. In 2010 Ireland spent €4bn importing oil. This equates to a somewhat crude average of €1,000 for every man, women and child, irrespective of age and income – and the comparable figure for 2011 is likely to be around €1,350.
With an average of 2.7 occupants per home, the additional burden placed on a household due to higher oil costs is €950. (While the margin charged by home heating oil companies and others is excluded from the €4bn bill, the margin of resellers is unlikely to have changed much over the past year, and so the €950 figure holds.)
The government is giving the matter little enough attention. First, government is guided to a great extent by the policy assessments of the Economic and Social Research Institute (ESRI). Sadly, the ESRI has been slow to acknowledge the link between oil costs and economic activity, and take the next logical step – highlight what can be done on a practical level to stop money leaving the country to buy oil, and circulate it within the local economy instead. (For the wider implications of rising oil prices see the accompanying graphs. Again, government-supported economists appear slow to tease out the issues here.)
Accounting firm Ernst & Young has a much better handle on the interaction between economic activity and oil cost, pointing out in February of this year that the Irish economy would shrink if oil prices remained in or around $120 a barrel. The latest figures from Ernst & Young, released at the end of May, say Ireland’s economy will contract by 2.3% in 2011, with consumer spending falling 4% over the course of the year.1
Households, including our 15% unemployed, are already struggling with other outgoings. The pressure from mortgages (790,000 of Ireland’s 1.4m homes are mortgaged) and taxes is only being compounded by rising oil prices.
Oil prices are likely to rise 30% over the next three years – that’s according to Fatih Birol, chief economist to the International Energy Agency (IEA), in an interview with Australian media at the end of April. The IEA’s track record has been to downplay concerns regarding rising oil prices, which makes Birol’s projection all the more prescient. Translated into prices at the pumps, the IEA forecast, if correct, would see the cost of a litre of fuel approach €2 within three years, up from €1.45 now.
Oil prices are likely to rise 30% over the next three years, according to IEA chief economist Fatih Birol
In early June, RTE reported that higher petrol and diesel bills would add €400 to the motoring bill of the average family in 2011. The figures drew on data compiled by AA Ireland, suggesting that the average family has gone from paying €165 a month on motor fuel in late 2010 to around €230 a month in 2011.
The key point, however, is that some households are much more exposed than others. A small urban home with low car reliance may be relatively unscathed. At the other end of the spectrum large rural homes with high car dependency are hurting most.
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