Deputy Richard Bruton gave me notice of his intention to raise on the Adjournment the subject matter as to the preparedness of Ireland's economy to deal with the price disruption with potential supply difficulties in the oil market. Deputy Bruton has five minutes to present his case and the Minister for Energy has five minutes to reply.
Adjournment Debate. - Oil Prices.
I thank you, Sir, for affording me this opportunity.
I believe the Minister for Industry and Commerce and the Minister for Energy are guilty of serious neglect in the manner in which they have exposed Ireland to damage due to the present crisis in the oil market. They failed on several counts. They failed to maintain an adequate supply of security stocks. They failed to deal with the excessive costs in the oil sector in Ireland. They failed to make any move towards tax harmonisation in line with our partners in Europe, and they failed to introduce even the rudiments of a conservation policy. The result of this complacency on the part of the Ministers and the Government of which they are members is that we will inflict on the Irish economy damage that would otherwise have been avoided.
On the storage point, during 1989 the Minister for Energy allowed our security oil stocks decline from 80 days' cover to 65 days' cover by the final quarter. That meant we were 1.5 million barrels below what was the minimum requirement by the international energy area for security stocks. The result was that when the Iraqi crisis broke the Minister had to engage in panic buying of stocks when prices on the world markets were at their highest. The effect of that was to impose very considerable sums of excess cost on the taxpayer which I estimate could run to £40 million if the Minister reached the 120 days' target he is talking of. Not only that, he was helping to contribute to the driving up of prices on those markets.
In the area of domestic costs, for the last three years the Government have prevaricated about Whitegate. At times there were exclusive negotiation rights for individual people involved. At other times a task force was to report urgently within three months. They did not report for 12 months or more. The result, on the Minister's own admission, is that we are continuing with outdated technology in that plant that is adding £25 million annually to our oil bills.
In the distribution sector the Minister for Industry and Commerce has faced a situation where, according to the most recent figures, Ireland's distribution costs for oil are double those of our EC partners and he has done nothing to deal with this. He set up a Fair Trade Commission inquiry last year but no action has been taken on foot of that inquiry and it is well over a year now since it was set up and held hearings. Indeed, I believe it is Government policy more than anything else that has contributed to killing competition in the petrol market.
Tax harmonisation is another serious area of neglect. We are now paying £750 million in oil taxes to the Government. Ireland's competitiveness in this area is vital if we are to succeed in Europe, and failure to harmonise taxes is putting a huge burden on Irish manufacturing industry. For example, for the key export fuel, auto-diesel, our taxes are 50 per cent higher here than those of our European partners. What, other than that, is handicapping us?
Finally, Fine Gael and other Members of this House have been crying out for years for a sensible conservation policy and the Minister only now, too late, is appointing a committee to look into this issue. The economy is going to suffer seriously as a result of neglecting all these areas. The impact on the economy of this oil crisis, the potential damage, which is serious because £400 million will be taken out of the economy that could pay 40,000 people in employment, is being greatly enhanced by failure on this Government's part to prepare properly an energy policy that would deal with this sort of eventuality.
Let me remind Deputy Bruton that the situation I inherited was largely left there from the period of his Government, his party having been in office for four years.
The main Government Party have been almost four years in power.
At the outset I should perhaps stress that there have, to date, been no supply difficulties experienced by Ireland as the world oil market remains well supplied with crude oil. Data published by the International Energy Agency shows that of the 4.2 million barrels per day of crude oil production lost from the Gulf as a result of the crisis beginning in August, 3.5 million barrels per day has been made up by OPEC by the end of September and net losses in crude arrivals have primarily been made up through stockdraw, mainly from outside the OECD area. In its communique issued following the governing board meeting of 31 October, the IEA said there was sufficient supply and that stocks were comfortable.
It should also be borne in mind that Ireland's dependence on imported oil for energy purposes has declined significantly since the last major oil crisis. Ten years ago, oil accounted for 69 per cent of total primary energy demand while coal and gas accounted for 9 per cent and 6 per cent respectively. In 1989 oil dependence had dropped to 44 per cent while the inputs from coal and gas had increased to 24 per cent and 15 per cent respectively. It is against this background we must consider our competence to bear the brunt of possible future oil shocks. The area of greatest concern would be automotive fuels.
Although, as I stated initially, there is no shortage of oil supplies at the moment, the price of oil has fluctuated wildly during the past few months as a direct result of the tensions in the Gulf region. We have seen prices rise from $19.29 per barrel for Brent blend on 31 July to a peak of $41.37 on 28 September. They have subsequently fallen so that they stand today at $33.95. Product prices have more or less followed crude prices but gasoil and kerosene have been quite volatile and it is likely that this trend will continue through the winter season. Spot gasoline prices have risen from $260.50 per tonne on 31 July to a peak of $355.50 on 10 October but have fallen back so that it is today trading at $312 per tonne.
The price rises in recent months have, for the most part, been a response to the political uncertainty and fear of war in the Gulf rather than the physical supply situation. Perceptions of possible future shortages arising from the tightness of international refinery capacity particularly for heavier crudes and seasonal surges in demand have also led to the recent price fluctuations. While the Gulf crisis remains unresolved, it is likely that prices will remain high in relative terms and Irish consumers, in common with other consumers worldwide, will have to bear the impact of prices passed through to the market.
The outbreak of war in the Gulf region, apart from causing an immediate and drastic increase in spot prices, could lead to major supply difficulties and the consequence of this scenario for Ireland has been considered in recent months by my Department. No changes in the existing system of price control for automotive fuels, regulated by the Minister for Industry and Commerce, have been made in order that the international spot price trends can be reflected in the Irish market and thereby act as a demand reduction measure. I have encouraged the public to use energy wisely and efficiently so that the economy can adjust to supply difficulties as they arise. Furthermore, as a security of supply measure, I have recently ensured that the following measures be put in place to deal with potential future supply difficulties:— The State-owned Whitegate refinery was moved to 100 per cent technical throughput in order to increase stocks levels at the refinery. Crude stocks in Whitegate at the end of October were 115,000 tonnes while product stocks were 116,000 tonnes. Whiddy oil terminal was re-activated to hold additional supplies of strategic crude oil. There are now approximately 200,000 tonnes in situ adding 20 days supply. These would be used to keep the Whitegate refinery in operation in the event of an international shortage in crude supplies arising from outbreak of war. Additional stocks of gasoil amounting to 20,000 and gasoline amounting to 21,000 tonnes have been built up in a number of locations around the country and these, too, will be available in the event of severe supply disruptions.
As a result of these measures, Ireland's strategic stocks are now high and have increased from 96 days forward consumption at 1 July, 1990 to 116 days at 1 October, 1990 and are now at around 120 days.
In the event of a shortfall in supplies arising, I expect that increases in product prices and conservation publicity measures would continue to play an important role in affecting demand. In addition some drawdown of stocks held by oil companies and large consumers would take place.
If the current situation in the Gulf deteriorated signficantly, in addition to the measures just mentioned, orders giving me control over the supply, distribution and export of fuels would be introduced. The impact of this legislation would be tailored to meet Irish supply difficulties so that the economy could continue to function despite international tensions.
In a crisis, Ireland would not act in isolation but, as a member of the International Energy Agency and of the EC, it would participate in whatever measures the agency deemed necessary to allocate supplies on an equitable basis among its members. The agency would operate through various bodies in an emergency, namely the Standing Group on Emergency Questions, the Industry Supply Advisory Group and the IEA Secretariat, to ascertain the level of available supplies throughout the IEA and to agree on the fair-sharing of those supplies among member countries. In this context, I would consider, but I see no possible need for this, the introduction of a rationing system for private motor vehicles should a real shortage occur. It is envisaged that any rationing scheme would only be introduced as a measure of last resort; the necessary planning has been done.
In view of the measures which I have outlined above, the House can rest assured that every measure has been taken to ensure that our economy is prepared for an emergency and, while administrative and operational aspects of measures taken to cope with supply shortfalls would no doubt be difficult, we are now well equipped to deal with whatever situation may arise.