Divisions have emerged within the Irish Cabinet regarding the continuation of fuel support measures, as rising prices at the pump threaten to reignite public discontent and potentially lead to further protests. Ministers are expressing concern that reversing excise duty cuts on petrol, diesel, and green diesel could provoke a significant public backlash.
The government has intervened twice to mitigate increased energy prices, first in March and again in April. These interventions cumulatively reduced excise duties on auto diesel, petrol, and marked gas oil by 30 cents, 25 cents, and 5.4 cents respectively on a VAT-inclusive basis. In June, these reductions were extended until September 1.
Finance Minister Simon Harris has indicated a plan to phase out the reliefs over a four-month period, aiming to avoid a "cliff edge." However, some ministers fear that maintaining these supports will strain the state's finances, potentially impacting planned tax cuts for middle-income earners and exacerbating the impact of soaring oil prices driven by the conflict in the Middle East. The Tax Strategy Group has estimated that extending the cuts to the end of the year could cost approximately €501.8 million.
Concerns are mounting within the Cabinet as petrol and diesel prices approach €2 per litre. One minister warned that removing the excise reliefs could lead to public demonstrations, similar to those seen in April, and undermine the government's fiscal strategy. "Any gain in a beefed-up tax package will be utterly squandered," the minister stated, questioning the logic of providing tax cuts only to offset them with the removal of fuel subsidies.
Another minister expressed apprehension about the government's credibility if it proceeds with ending the subsidies while also signaling financial prosperity. "We will have absolutely no credibility if we do this," the minister cautioned, predicting a "national furore."
Ministers have also voiced frustration with Public Expenditure Minister Jack Chambers's perceived austerity on spending. A senior government source suggested that a conflict over fuel prices could derail budget preparations. "This budget could start to come off the rails before it even begins if this becomes a public crisis," the source warned.
Finance Minister Harris has thus far declined to state definitively whether the fuel subsidies will be extended or ended. He has emphasized a commitment to "reward hard work and reduce family costs," and to explore ways to "structurally reform and reduce these costs" in areas like childcare and energy. Harris has indicated that a decision on excise duties would be contingent on falling wholesale oil prices, stating, "The Tánaiste has said repeatedly that, ultimately, the greatest economic intervention we can see is de-escalation in the Middle East – and that is still the case."
Officials from the Finance Ministry have engaged with fuel importers, distributors, and retailers to seek clarity on costs. The volatility of oil prices, with significant fluctuations in recent months, adds to the complexity of planning. Wholesale oil prices have ranged from just over $70 to nearly $100 per barrel in the past two months.
Kevin McPartlan, CEO of Fuels For Ireland, has urged the government not to increase fuel taxation or other policy costs if international wholesale prices remain high. He noted that motorists could face an increase of around 35 cents per litre for diesel due to the full reinstatement of temporary excise duty reductions, an increased carbon tax, and higher renewable fuel blending obligations. McPartlan recommended pausing the reinstatement of excise duty if global fuel prices continue to be exceptionally high, to avoid amplifying the impact of global markets with additional domestic costs.