The announcement by the Government that the reintroduction of fuel excise duties and levies will not now proceed on 1 September came as a welcome relief for fuel users who had seen rapid increases in the cost of diesel and petrol in recent weeks.

That rapid increase has been driven by a confluence of factors.

The ongoing standoff over shipping through the Strait of Hormuz has kept oil prices elevated on global markets, with Brent crude holding close to $90 a barrel this week.

The bigger driver for fuel costs recently, however, has had more to do with refinery capacity than oil prices.

Last week, we saw that the gross margin refiners in the US were making on producing a barrel of diesel hit a record high.

This is because of both the significant drop in output from the Gulf region and the shutting down of capacity in Russia due to drone attacks from Ukraine.

Global demand for diesel is currently well ahead of supply.

It is not unreasonable to expect that diesel prices at the pump in Ireland will soon exceed €2 a litre. The other essential fuel which is in short supply is natural gas.

Wholesale prices for the fuel for September delivery in Europe are close to their highest level since the start of the conflict in the Gulf, with the price of natural gas for winter 2026 currently more than 10% higher than the March peak.

Again, supply is the issue here. Europe’s winter stockpiles of gas are currently at just under 63% of capacity, which is the lowest level for this time of year in at least five years. The EU previously cut the November target fill level from 90% to 80%, but even that target seems unlikely to be achieved ahead of the start of winter drawdown of supplies. Ireland relies on natural gas for between 40% and 50% of the country’s electricity needs, so the increase in gas prices will directly feed through to domestic and farm electricity bills.

As every farmer learned in 2022, increases in gas prices also feed through to higher fertiliser prices.

With the cost of soil nutrient also increasing during CBAM tax measures, the outlook for production costs for the coming months and into 2027 is bleak. As the Government statement accompanying the announcement of the delay in fuel duties said: “Ultimately the greatest economic intervention we can see is de-escalation in the Middle East.”

A resolution there allowing shipments to restart at a meaningful pace is the news that every energy consumer needs to avoid what could be a very expensive winter.