Marked gas oil (MGO), or green diesel as its commonly known, rose by approximately 2.04c/l this week as a result of imposed carbon tax increases. However, the additional price hike has been absorbed for now by a 3c/l fall in the market.
The increase in carbon tax of €7.50/t from €41/t of CO2 to €48.50/t of CO2 as announced in Budget 2023 came into effect this week (1 May).
This follows the return of the fuel excise duty earlier in March at a rate of €131.47 per 1,000 litres, also actioned as part of Budget 2023 This alone bumped green diesel prices by 7.6c/l, according to the Association of Farm and Forestry Contractors in Ireland (FCI).
The reimposed fuel excise duty had been temporarily reduced by the Government in response to the increased cost of living and soaring fuel prices witnessed last year as result of Russia’s invasion of Ukraine.
“While agri diesel prices are currently lower than this time last year and there are no issues with availability, these two additional fuel taxes are estimated to add almost 10c/l to agri diesel costs for contractors. For many contractors using more than 150,000 litres of fuel, that’s an extra €15,000 cost due to additional Government taxes being taken out of farming through contractor operation,” said John Hughes, FCI national chair.
“For Irish farm contractors, fuel costs are variable and not negotiable. They have a tendency to increase during the silage season when demand is at its highest. Fuel cost inflation is just one of a number of cost challenges facing Irish agricultural contractors,” he added.
Fuel prices on downward trend
Diesel prices have continued to trend downwards in recent weeks. As we went to press this week, prices of 89c/l to 94c/l (VAT inclusive) were being quoted for green diesel.
This means green diesel is back about 11-15c/l on average from 1.01-1.05c/l (VAT inclusive) six weeks ago.
Although prices are back well on last year’s highs of 1.60c/l (VAT inclusive) diesel still remains a significant variable cost to farmers and agricultural contractors.
International oil markets continue to track downwards too, showing continued signs of retraction back to pre-April prices and this year’s lows of $70/barrel.
An announcement made by OPEC and Russia that they were reducing daily output by more than one million barrels in early April caused prices to surge by 8% at the time to highs of $87/barrel.
On Tuesday evening as we went to press, Brent crude was trading between $76 to $79 per barrel, the lowest it has been since the last week in March. To put current prices into perspective, Brent crude peaked at $127/barrel last June, almost 67% more.