Batten down the hatches for what could be a ‘difficult’ winter

Leader column

Motorists have seen some relief at the pumps in recent weeks due to extended government measures on excise duties and ceasefires in the Middle East conflict. But the reprieve could be short lived.

The ceasefire between the US and Iran is set to end this evening (Wednesday) Washington time. At the time of going to print yesterday, it was hoped further talks would take place to, at least, extend the ceasefire; though both sides said they were poised for war.

A lasting deal is needed to end the US-Iran war and reopen the Strait of Hormuz. Another sticking point in negotiations has been Tehran’s stockpile of enriched uranium, which US President Donald Trump claimed Israel had agreed to hand over.

However, Iran’s foreign ministry has said the stockpile, thought to be buried from US bombing, was “not going to be transferred anywhere”.

The Minister for Transport, Darragh O’Brien, this week said that electricity and gas prices will be impacted in the coming months if a lasting deal is not struck.

Increases of between four to nine per cent are predicted for electricity, depending on the provider. These will trickle through between May and July as new purchasing agreements (hedging arrangements) take effect.

The impact on gas customers will be much more severe – with some commentators saying it could be as high as 30%.

Food price inflation is another area being watched closely, and one that would impact every household in the country.

Irish grocery price inflation stood at 6.5% over the 12 weeks to March 22, but shoppers may now face higher bills at the checkout in the months ahead due to the conflict in the Middle East.

Surging fuel prices have also impacted customer confidence and dampened household spending as travel plans were shelved.

Some reports have also suggested that food availability could be hit by a possible shortage of CO2 gas, which is a key input in the food industry.

The government has said that this is a fluid situation and, while it has little control over world affairs and international markets, it may yet need to bring in further measures and, thankfully, there should be some money in the coffers to absorb that.

An economic forecast published by the government yesterday (Tuesday) predicted that the economy will continue to grow even in the “severe” scenario of a prolonged conflict in the Middle East.

The Spring Economic Forecast, prepared by Department of Finance officials, set out three different scenarios. Projections differ depending on factors such as the depth and duration of the Iranian war.

The forecast was published following yesterday morning’s Cabinet meeting.

At the time of going to print, the Tánaiste and Minister for Finance Simon Harris was expected to tell Cabinet colleagues that the Irish economy is projected to continue to grow in all scenarios, albeit at a more moderate pace.

Mr Harris will point to the importance of running budget surpluses and building up financial buffers as a means of protecting the economy at a time of international economic uncertainty.

He will also warn that the conflict in the Middle East has triggered a large energy price shock that is reverberating across other supply chains.

On Monday, Mr Harris told reporters that Ireland needs to “keep the powder dry” when it comes to economic planning, “for what could be a very difficult winter” ahead.

He did not rule out further energy credits but added that a balance had to be struck.

In the meantime, government departments will come under pressure to tightly control costs and adhere to budgets.

The Minister for Public Expenditure, Jack Chambers, has also emphasised the importance of reforming processes, generating savings and moderating current expenditure in order to focus investment on capital infrastructure like housing, roads, energy and water. These investments are the best way to protect jobs and safeguard the economy.

Motorists and households too must batten down the hatches – reduce their mileage, food waste, and better manage their resources.

War or no war, it’s an exercise worth doing and makes for more sustainable living and reduced carbon emissions.