Dáil Éireann - Volume 342 - 10 May, 1983

Ceisteanna—Questions. Oral Answers. - Petrol and Oil Prices.

[596] 4. Mr. Flynn asked the Minister for Trade, Commerce and Tourism if he is aware of the difficulties being experienced in different parts of the country by petrol retailers at this time; and if he proposes to take any steps to deal with the matter.

Mr. Cluskey: In accordance with the recommendation of the National Prices Commission, I allowed an increase of 2.13 pence per gallon, excluding VAT, in the retailers' gross profit margin on petrol, with effect from 1 March 1983. I do not propose to take any further steps in the matter.

Mr. Flynn: Would the Minister agree that in certain areas around the country at this time petrol retailers are having a very lean time? Would he agree that it would be necessary to give retailers, because of the huge costs involved in holding stocks, a small increase every time the price has risen generally?

Mr. Cluskey: As the Deputy will appreciate, I am mainly guided by the recommendations of the National Prices Commission with regard to applications of this nature. The last application was complied with. I might add that there was considerable agitation before the recent March increase was given, but since then I have had no representations whatsoever from the retailers.

Mr. Flynn: One final supplementary. Is there any substance in the rumour going around in these circles at this time that it is being contemplated to allow unrestricted price structuring in the retail petrol trade?

Mr. Cluskey: A question is tabled on the subject matter of decontrol of petrol prices and I shall be answering the Deputy's question shortly.

Mr. Molony: Would the Minister agree that, given the fact that about 40 per cent of the retail trade is controlled by the multi-national oil companies and that in [597] those retail outlets there is a particularly large turnover involved, it is inappropriate that those multi-national owners of the large retail outlets should be given the same percentage as the small retailers to whom Deputy Flynn has referred?

Mr. Cluskey: I do not necessarily accept the figures quoted by the Deputy. In fact, there have been a number of misleading statements made with regard to the control of oil products.

An Ceann Comhairle: A final supplementary question from Deputy Flynn, please.

Mr. Flynn: The 2.13 pence granted to retailers recently did not take into consideration any question concerning stocks. Would the Minister be prepared to include in the next price increase an element in respect of the stocks which necessarily must be held over at enormous expense by these people?

Mr. Cluskey: I am sure that the Deputy would agree that it would be very unwise of me to give a blank cheque during supplementary questions in the Dáil——

Mr. Molony: A Cheann Comhairle——

An Ceann Comhairle: No, I am not going to have a debate on this subject.

Mr. Cluskey: ——on the particular approach taken, not only by me but by the National Prices Commission, in regard to future applications which may be made concerning this.

Mr. Molony: On a point of order, would it not be in order for me to ask a question? The Minister referred to a figure which I gave as one which he did not accept. I wished to ask him to clarify the position, purely on a point of information. I know exactly what the Minister is saying.

An Ceann Comhairle: That is not a point of order, Deputy. Secondly, the number of supplementary questions [598] which may be allowed is at the absolute discretion of the Chair.

Mr. Molony: I appeal to the Chair——

An Ceann Comhairle: If the Minister wishes to give the information, I have no objection.

Mr. Cluskey: The next two questions are on roughly the same subject.

Mr. Molony: This arises out of the Minister's reply to my supplementary question.

An Ceann Comhairle: Will the Deputy please ask the question?

Mr. Molony: The Minister mentioned that the figure of 40 per cent to which I referred as being controlled by the multi-national companies was not one which he would accept. Would he give me some notion of the correct percentage of outlets held by the multi-nationals, if it is not 40 per cent?

Mr. Cluskey: The Deputy will recall that what I said was that I do not necessarily accept the figures which were given, that there have been a number of speculative figures given in the recent past on the question of control in pricing of oil products. In view of that, I am sure the Deputy would accept that it would be very unwise of me to accept figures which are casually mentioned in the House.

5. Mr. McCartin asked the Minister for Trade, Commerce and Tourism the action he proposes to take to control the prices being charged by multi-national oil companies in this country.

Mr. Cluskey: Control of prices of a wide range of petroleum products sold by the major oil companies is exercised by means of orders under the Prices Acts. The current order in force is the Maximum Prices (Petroleum Products) (No. 5) Order, 1983, which was made on 29 April, 1983. This Order sets maximum prices for petroleum products, but of [599] course the actual prices charged by the companies are not necessarily those set out in the order; they are in many instances lower, reflecting various discounts and rebates given by the companies on many petroleum products. The maximum prices set are kept continually under review both by my Department and the National Prices Commission, which advises me on this matter.

Mr. McCartin: Since the prices are subject to Government order, could the Minister tell the House if he is satisfied that these orders are correctly made, in view of the fact that companies selling on the Irish market can sell the same produce down the road in Northern Ireland at a much cheaper rate and if the Minister can explain to traders, consumers and others concerned the reason for this difference? I need not go into the figures here and need not tell the Minister the difference in the figures. Is the Minister satisfied that the Government should make new orders regulating those prices? Since oil companies are actually selling below the order price made, were the Government given the right information when they made those orders?

Mr. Cluskey: I can appreciate the concern of everybody with the price of oil products here because it has very wideranging effects on the commercial and social life of the country. As I explained, the petroleum prices are at present subject to control and the National Prices Commission keep under continuous surveillance movements that would affect the price of petrol and other oil products. There are some comparisons which, in the opinion of my Department, are not valid because they do not compare like with like. But a number of factors are taken into consideration in determining the price of oil products and this is done with great care and attention by the National Prices Commission. Some time ago I asked the National Prices Commission to undertake a special review of the whole pricing mechanism of oil products. That review is under way and I expect their report in the near future. That [600] report will take into consideration all the relevant factors regarding any differential between here and the United Kingdom and other member states of the EEC. It is only fair to say that I believe the National Prices Commission have approached their task in a responsible and balanced way and, while not directed by them, at least I must be guided by their recommendations.

Mr. Molony: Would the Minister agree that it must be a matter of the gravest concern that, since we began controlling our petrol prices in 1979, the differential between the Irish pre-tax price of petrol and the UK pre-tax price of petrol has moved from a position of being 10 per cent in Ireland less than it was in the UK in January 1980, steadily upwards to a position where it now costs 50 per cent more per pre-tax unit of petrol here in January of this year? Would the Minister agree also that it is a matter of gravest concern that over that same period, 1979 to 1983, the mark-up given to importers had doubled?

Mr. Cluskey: No. As a matter of fact I can tell the House the factors that are taken into consideration: the international oil price movement both on official and on spot prices, as these affect the cost of imported produce and exchange rate movements of the Irish pound against the dollar on which international oil prices are fixed. The House will agree also that there has been some considerable fluctuation between the punt and pound sterling and indeed between the pound and the dollar particularly in the period the Deputy mentioned which would have had a very significant impact on our pricing.

The question was raised earlier of retail prices here. In retail prices here there is a margin of between 6p and 7p more than is given in the United Kingdom and in other European countries. That is justified by our throughput and the limited market we have. All of these factors, including the Whitegate one, tend to make the difference. As I said earlier, all relevant factors are very closely scrutinised by the National Prices Commission [601] and they are at present engaged in a comprehensive review of price control with regard to oil products.

Mr. R. Burke: On a number of occasions the Minister has emphasised that all relevant factors are kept under constant surveillance by the National Prices Commission. How then can the National Prices Commission and the Minister justify signing orders for prices which are greater than the companies can actually charge the motorist because the market place will not withstand them? Surely it is the responsibility of the National Prices Commission and the Minister to protect the interests of motorists? How then can the Minister justify signing orders for prices which are higher than the market place itself can sustain?

Mr. Cluskey: I am surprised at the Deputy asking that question——

Mr. R. Burke: The Minister should not be, because there are a lot of people feeling the pinch out there.

Mr. Cluskey: As I explained earlier, the order relates to maximum prices. There are factors in individual companies that would allow them to charge less than the maximum price which would not necessarily apply to other companies. I am sure the Deputy will agree that a Government agency dealing in an area such as this must do so in an objective and fair manner and take into consideration the circumstances not merely of the very large companies which may be in a position to offer their produce at lower prices — and that applies to a wide range of produce — but also those companies who would not be in a position to do that and who, in order to remain solvent, would have to charge the maximum price. It is the maximum prices that is important and there is nothing to stop anybody in any other area charging less.

6. Mr. McCartin asked the Minister for Trade, Commerce and Tourism if and when he has been given recommendations by the National Prices Commission in relation to oil prices.

[602] Mr. Cluskey: I am advised by the National Prices Commission on an ongoing basis in relation to the prices of a wide range of commodities, including oil products. The commission keeps such prices continually under review and advises me as it thinks fit.

The commission have made many recommendations to me over the past years in relation to petroleum product prices and details of these recommendations are contained in the Commission's monthly reports which are presented to the Houses of the Oireachtas. In their latest recommendation on this subject which I received in late March 1983 the Commission recommended significant across the barrel reductions in petroleum product prices and following this recommendation I made an order on 31 March 1983 which reduced the pre-tax price of petrol by an average of about 13 pence per gallon. Reductions were also made on the same date, in the pre-tax price of gas oil averaging about 7 pence per gallon while fuel oil was reduced by amounts ranging from 1p to 3.5p per gallon.

Mr. McCartin: Would the Minister agree with me that while we expected these prices to come about, and they were entirely justified, nevertheless they reflect only recent changes in the price of oil in the market place and not the excessive prices being charged already? We appreciate that this is a situation the Minister inherited from his predecessors, and not something that happened today or yesterday. But the Minister should comment on the fact that this most recent reduction barely compensates for the reduction in oil prices we had recently and does not take into account the fact that we were already being overcharged to the extent that we——

An Ceann Comhairle: A question, please, Deputy.

Mr. McCartin: Is the Minister further aware that the price of petrol here is still 163 per cent that of the lowest in other EEC countries with which we are forced to compete?

[603] Mr. Cluskey: As I said earlier on a couple of occasions, the National Prices Commission take all factors into consideration in determining their recommendations. It is only fair to say that it was not just the price of petrol or of oil dropping on the international market that contributed to the decrease we experienced but also the fluctuation in international currency which had an effect, and that all of those factors were taken into consideration by the National Prices Commission. However, to ensure that the full facts are known and so that there can be no doubt but that all the relevant factors are taken into consideration, at my request the National Prices Commission are engaged in a very comprehensive review of the whole pricing mechanism with regard to oil products, and I expect to have their report in the near future. I can assure the House and the Deputy that any factor which can contribute to the reduction of the price of oil products here will be seized on and implemented by me.

An Ceann Comhairle: Deputy Flynn and then a final supplementary from Deputy Molony.

Mr. Flynn: May I suggest to the Minister that the National Prices Commission do not take all factors into consideration? The major factor they should be concerned with, which would result in a significant reduction in the retail price of petrol, is the question of the price that the international companies contract with their Irish subsidiaries and it does not reflect a true figure on world markets. Herein lies the great difficulty and I would ask the Minister——

An Ceann Comhairle: We are getting into a debate.

Mr. Flynn ——to ensure that the next time the National Prices Commission make a recommendation on the retail price of petrol it will reflect what is the base world market price to the major oil [604] companies and not the one as issued to their subsidiaries.

Mr. Cluskey: I am satisfied that all factors are taken into consideration by the National Prices Commission.

Mr. Molony: Would the Minister accept that the currency fluctuation cost amounts to no more than 6p per gallon taking into account such fluctuations over the past two years? Would the Minister also accept that the only other reason for a price differential as between this country and the United Kingdom is the Whitegate factor which he himself or his Department have assessed at a cost of about 4p per gallon? Would the Minister accept that the other reasons given by him, namely the particular problems of small Irish retailers, are problems that existed prior to our taking the price control of petrol into out own hands in 1979 and that prior to then problems like those of retailers did not seem to cause any differential as between our price and that in the United Kingdom?

Mr. Cluskey: Statements are being made which are not comparing like with like. Some considerable time ago oil prices were not a major issue as they are now and rightly so. The factors which were mentioned by the Deputy are not the only factors that have to be taken into consideration. The question of the retailers amounts to approximately 6p to 7p more that in other countries which have been mentioned. On the question of Whitegate the figure would be nearer to 6p than 4p per gallon. There are a number of other factors, including the fluctuation in the exchange rate between the dollar and the punt. That is a major consideration. There are other factors which are not within the control of my Department but which relate to the whole question of energy policies. It may be advantageous at a particular time to buy solely on the spot market which could result in considerable reductions. There are, however, disadvantages in that approach. It has not yet been decided. Although those factors are not within the control of my Department [605] they are all factors which obviously have an effect on the price.

An Ceann Comhairle: Deputy De Rossa with a final supplementary. I am sorry, we have dealt with six questions in over half an hour.

Mr. De Rossa: I found it very difficult to hear the Minister's response. Have the Department or the Minister at any time in recent years refused an application for an increase or varied it in any way and are the oil companies required in law to apply for increases or do they simply do it as a matter of courtesy?

Mr. Cluskey: They are required to submit application to the National Prices Commission. They cannot just raise the prices. I cannot honestly say whether in the past any increases sought were refused or varied except in relation to the last one. I made a variation in the recommendation that was made with regard to the decreases of last March. It is the normal practice to allow flexibility for the oil companies in relation to each product — petrol, heavy fuel, gas. On the last occasion when the commission made their recommendation I did not accept it in full. I insisted that a greater proportion should be taken off petrol than the other two products. I felt and still feel that that would have the greatest impact as far as the consumer is concerned.

7. Mr. Reynolds asked the Minister for Trade, Commerce and Tourism if he is considering decontrolling the price of petrol and oil; if so, when; and if he will ensure that consumers in rural areas will not be adversely affected by such a decision.

Mr. Cluskey: I am not considering any proposal for the decontrol of petroleum product prices at present. The Deputy may, however, have in mind, my announcement last week that the National Prices Commission are reviewing price control arrangements for these products, to ensure that they continue to serve our current needs adequately. The [606] commission have carried out such reviews in the past and I will, of course, give full consideration to any recommendation they may make to me. The Deputy may be assured that the consumers interest will be uppermost in my mind in any consideration of this matter.

Mr. Flynn: It is appreciated that the consumer would have the Minister's interest. It is not clear, however, whether it is the intention to allow a two tier price system in this country and that is the kernel of the question.

Mr. Cluskey: No.

Mr. Flynn: Now or in the future?

Mr. Cluskey: No. I do not want to mislead the Deputy. I have no intention of doing it now; I am not contemplating doing it now but any recommendation that may come in the future — and I am not anticipating any but I do not want to mislead the House even inadvertently — from the National Prices Commission will be given serious consideration by me.

Mr. Flynn: Has such a recommendation come to the Minister?

Mr. Cluskey: No, it has not. I do not anticipate one but I do not want to be misleading.

Mr. McCartin: In view of the serious concern of both consumers and traders in my area I would ask the Minister if he proposes to issue a substantial statement on all of this subject clearly setting out, for the benefit of everybody concerned, what the tax element is and what the other elements are so that he himself and the Minister for Finance will not be getting the blame for what I believe is the failure of the National Prices Commission, and will the Minister agree with me that it is particularly galling for people in Border areas——

An Ceann Comhairle: The Deputy may not engage in argument. It may be a good argument but it is nevertheless an argument.

[607] Mr. McCartin: One sees small traders in court for 2p on the price of a packet of jelly.

An Ceann Comhairle: We cannot have an argument on this.

Mr. McCartin: I want to ask the Minister to comment on the fact that people are concerned about the failure of the National Prices Commission to come to grips with the problems.

Mr. Cluskey: First of all, I do not accept the Deputy's assessment of the role of the Prices Commission in this area. I fully accept the need for people to be aware of what all the circumstances are and what gives rise to them. In fact, I recognised that when I made a speech yesterday week giving the type of detailed information the Deputy sought, and I will be only too pleased to let the Deputy have a copy of the speech I made yesterday week which itemised the different factors contributing to the overall prices spiral.

Mr. R. Burke: Would the Minister not agree that companies, as he said earlier, are in a position to trade at prices below the maximum orders which he himself has signed? Would that not indicate that the decontrolled price would be for the benefit of the motorist at this point in certain parts?

Mr. Cluskey: The difficulty with that — it is mentioned in the question I am dealing with at the moment — is that that could result in people in remote rural areas having to pay a higher price. I believe that would be a highly undesirable development. It is something that would have to be given full consideration if such a decision were to be made.

Mr. R. Burke: I fully accept the Minister's point that it would be highly undesirable to have a pricing structure which would result in a dearer product in rural areas but surely the Minister himself has [608] made the point that companies are selling below the maximum.

An Ceann Comhairle: A question, Deputy.

Mr. R. Burke: Would the Minister not agree there is a strong case to be made for decontrol at this point?

Mr. Cluskey: As I said earlier, I am awaiting the report — it will be published in the near future — of the Prices Commission on this whole area of pricing maintenance.

Mr. R. Burke: One final supplementary——

An Ceann Comhairle: We are having a debate on each question.

Mr. R. Burke: May I ask the Minister what the composition is of the review board within the Prices Commission? Is it the normal Prices Commission structure or are they taking advantage of international advisers who could talk about international prices and the fact that multinationals are bleeding the Irish market dry with regard to their invoice prices from the Cayman Islands to Port Talbot and other places?

Mr. Cluskey: The Prices Commission are themselves considering the matter and I understand they have engaged an expert consultant of international repute.

Mr. Molony: Arising out of the Minister's reply——

An Ceann Comhairle: Deputy Molony on a final supplementary. We are heading for the Guinness Book of Records in regard to supplementaries at the moment.

Mr. Molony: Would the Minister indicate in the most definite way he can when the Prices Commission will complete their review and report to the Minister? Secondly, the Minister referred to a speech he made last week in which he analysed the difference between the Irish [609] and the UK pre-tax price and would the Minister be good enough to facilitate me by giving me a similar analysis for the months of January, February and March of this year? I do not ask for the information now but perhaps he would furnish it to me in written form later.

Mr. Cluskey: With regard to the Deputy's first supplementary, I cannot give a definite date. I met the Prices Commission last week and I urged on them the need to expedite the report as quickly as possible and they gave an undertaking they would furnish the report in the near future.

Mr. Molony: The Minister has not replied to the second question I asked.

Mr. Flynn: It will be in the form of a reply to a question I submitted which was ruled out of order.

Mr. Cluskey: I will be only too pleased to give the Deputy any information of a factual nature with regard to price control and increased differentials. In fact it would be extremely helpful if Deputies sought that information.

Mr. Flynn: When will the Minister make an announcement about a reduction in price?

Mr. Cluskey: In the immediate future when I get a recommendation justifying my doing so.