Oireachtas Joint and Select Committees

Wednesday, 23 March 2022

Joint Oireachtas Committee on Transport, Tourism and Sport

Fuel Prices: Discussion

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Apologies have been received from Deputies Cathal Crowe and Steven Matthews, and Senator Gerard Craughwell. The purpose of today's meeting is to discuss the rising cost of fuel. This meeting will take place over two sessions. On behalf of the committee I welcome to this first session Mr. Tom McIlduff, chief executive officer; and Ms Anna Cullen, communications, AA Ireland. We also have a delegation from Fuels for Ireland, represented by Mr. Kevin McPartlan, chief executive officer. Representing the Irish Petrol Retailers Association, IPRA, and appearing remotely, I welcome Mr. David Blevings, spokesperson, and Ms Raylene McCaughey, manager of McCaughey's 24-hour service station in Monaghan. I hope I am pronouncing her name properly. There is also Mr. Martin McSorley, the director of Drive Service Stations, and Mr. Declan Cronin, director of Newpark Service Centre. We will be joined shortly by Mr. Alan O'Donnell, director of Woodview Service Station. They are all very welcome to this afternoon's meeting on the rising cost of fuels, which is a very important matter for business and the public. We are the committee responsible for transport and we thank the witnesses for engaging with us today.

All witnesses are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against a person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory with respect to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction. For witnesses attending remotely from outside the Leinster House campus, there are some limitations to parliamentary privilege and, as such, they may not benefit from the same level of immunity from legal proceedings as a witness who is physically present does. Witnesses participating in this committee session from a jurisdiction outside the State are advised that they should be mindful of domestic law and how it may apply to the evidence they give.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts of Leinster House will be asked to leave the meeting. In this regard, I ask any member partaking via MS Teams to confirm, prior to making his or her contribution, that he or she is on the grounds of the Leinster House campus.

Members and all those in attendance in the committee room are asked to exercise personal responsibility in protecting themselves and others from the risk of contracting Covid-19. I welcome Mr. Tom Sheridan to our committee. Mr. McIllduff may now make his opening statement. I ask witnesses to be conscious of time and try to keep within the five minutes allowed. We have a number of witnesses and we want to get to the main subject of the day, which is asking questions.

Mr. Tom McIlduff:

I will be as quick as I can. I thank the committee for giving us the opportunity to speak today. The AA is Ireland's motoring organisation It has acted as a voice for motoring interests and in a leading role supporting road and transport policies for more than 100 years. We have also grown to become one of Ireland's largest personal lines insurance intermediaries in Ireland, providing motor, home and travel insurance.

The rising cost of fuel is one of the most important issues for the motorist today. The AA fuel prices survey, which the business has done since 1991, has been followed in that time by many consumers and customers. Our AA fuel website page is one of the most visited on the site, with in excess of 30,000 visitors over the past month, an increase of 500% compared with the previous month.

This survey has shown that average fuel prices are rising steadily, and as the committee knows, we have had record prices several times in the past few weeks. The average price for fuel in Ireland currently stands at €1.84 per litre for petrol and €1.90 per litre for diesel. That is 62 cent per litre more than in 2020 for petrol and 70 cent per litre more than in 2020 for diesel. There has been considerable media attention in recent weeks as the price passed €2 per litre, although that price subsided, in part due to the relief in duties and the settling in oil prices internationally.

As I am sure members of the petrol industry will illustrate, the oil market is very volatile and changeable now, and that is something out of the control of our Government. The reality is that the price that Irish consumers will pay is determined largely by global supply and demand economics.

We have seen high oil prices before and back in July 2008, Brent crude oil reached a record just over $147 per barrel but 14 years ago the price of fuel was €1.17 per litre for petrol and €1.09 per litre for diesel, which is 57% cheaper than today for petrol and 74% cheaper than today for diesel. Inflation of course plays a role but so do increased taxes and duties.

If we paint a picture of the fuel running costs of the average motorist in 2022, what do we see? For a start, surveys indicate the average motorist drives 17,000 km per year in an average family hatchback, which probably has a 50-litre fuel tank. That motorist is currently paying €92 for an average fill of petrol or €95 for an average fill of diesel. In recent weeks, a number of customers have paid more than €100 per tank. Those who drive larger vehicles, whether by choice or necessity, such as a seven-seat car, are still paying more than €100 per tank. According to AA Ireland calculations based on this, the average petrol car owner is spending €2,234 on petrol per year or €1,900 per year on diesel. The diesel car is likely to go further because they are slightly more efficient. In the case of a petrol car, that driver is spending €680 more per year just on fuel than two years ago and €700 more in the case of diesel. By AA Ireland calculations, for every 20 cent increase in the price of fuel, the average driver adds approximately €240 per year to their fuel bill.

It is also important for us to indicate that there are actions motorists can take while driving that can reduce their fuel use when driving. For example, research indicates that driving at 100 km/h rather than 120 km/h on a motorway can reduce fuel consumption by more than 20%. In addition, a tyre underinflated by 10% can increase fuel use by 2%. For those living in urban centres, there is an alternative to a car. They are not always taken up but many of us might jump on a Dublin bus, a DART, Luas or a bike in a cycle lane to get to our destination. The reality for many Irish consumers and AA Ireland customers is that in less densely populated areas, this can be very difficult.

We know that people living in rural areas are much more dependent on their cars and that, in many instances, they simply do not have the variety of options that those living in more densely populated areas have.

This was borne out by statistics from the CSO, in the national travel survey, which showed that 12% of journeys in populated areas were by public transport and in thinly populated an rural areas, only 1.7% were made by bus and 0.2% were made by rail. Some 83% of journeys are made by car in thinly populated areas according to this data. For many people who bring their kids to school, go to college, or care for relatives, which are everyday activities, using the car has become increasingly expensive to do because of the rising costs of fuel. AA Ireland welcomes the move to electric vehicles, EVs. We are adapting our business every day to suit this change. For example, in recent weeks we took delivery of several free-wheeling hubs, to allow our patrol vans to more quickly rescue EVs and get them back on the road quickly by being towed behind a patrol van rather than being lifted on the back of a larger lorry.

The future is very much electric and we are seeing that happen. Currently, about 12% of new cars sold in Ireland are fully electric. Using an overnight rate for electricity, a full charge can cost as little as €6 for approximately 400 km of driving. The average cost of fuel is €50 for the same distance. However, the average Irish car is nine years old, and despite State subsidies, the electric car remains out of reach for many.

The reduction in duties on petrol and diesel is welcome and will have a positive impact on motorists affected by these higher prices. We all want a cleaner, greener automotive future, but running costs impact many motorists, especially those who simply do not have a wealth of transport alternatives in thinly populated areas. I thank the committee for inviting us.

Mr. Kevin McPartlan:

I thank the Chair, the clerk to the committee and the committee for inviting us. Fuels For Ireland is the representative body for the fuel sector in Ireland. This industry employs more than 13,000 people in filling stations alone and provides a similar number of jobs in support functions. It is an industry that collects in excess of €3 billion in taxation on behalf of Government each year. It is working hard to meet our shared objective of carbon neutrality by 2050. Fuels for Ireland members currently provide 50% of Ireland's total energy needs.

During all the public health restrictions designed to protect us from Covid-19, our people continued to show up to work day after day, providing the products on which this country relies for transport, heating and business. Russia's appalling and brutal invasion of Ukraine has created significant challenges for our industry, but we were already in challenging times, particularly with high international commodity pricing. Demand was already outstripping supply as the world emerged from Covid-19. Demand from China in particular spiked very sharply. The Organization of the Petroleum Exporting Countries, OPEC, refused to increase production and the sanctions imposed on Iran were all having a serious impact, which was reflected in high wholesale prices for fuel products in the months prior to 24 February. In the days preceding Russian aggression, we had three severe weather events in Ireland that prevented or delayed cargoes of fuel being unloaded.

Coming into February, ahead of the tragic invasion of Ukraine, we had two specific problems. There was a pinch on supply, with less than we would have liked in stock due to unusual weather events. Second, there were rising international wholesale prices. On top of these pre-existing challenges, the tragic invasion of Ukraine occurred and caused extreme volatility within our market and our industry. This was by no means unique to Ireland.

Over many years Europe has developed a massive reliance on Russia for its energy. Some 29% of the gas used in the EU and 35% of oil products came from Russia. Despite the lack of formal sanctions, many companies, including Fuels for Ireland members, unwound themselves from contracts with Russian suppliers. This effectively reduced the supply to the global and European oil markets. In addition, many countries that had used Russian gas for electricity generation switched to oil and thereby created a massive increase in demand.

While wholesale fuel prices have fluctuated since Russia’s invasion of Ukraine, the overall trend has been significantly upward. In the 13 days between the start of the conflict and the Government announcing an excise duty reduction, the wholesale market prices had increased by 26 cent per litre on gasoline and 45 cent per litre on diesel. When VAT is applied, petrol ultimately cost Fuels For Ireland members 32 cent more per litre, and diesel 55 cent more per litre to bring to consumers. While the excise duty cuts succeeded in blunting the price rises, they were never going to entirely eradicate or reverse them. Recent weeks posed significant challenges regarding prices, but also in the availability of product.

Fuels For Ireland members have worked hard to ensure stability of supply, but there has been much ill-informed commentary on stocks held. The reality is that, while we have always maintained supply, there has never been the abundance of fuel in Ireland that some commentators have repeatedly and wrongly claimed. To illustrate this point, in the six months prior to January 2022, the maximum commercial stock of fuel products, including crude oil at the refinery, that was held at any point in Ireland was sufficient for 19 days. In the aftermath of the invasion of Ukraine, there was a point where there was only one day of commercial stock of diesel held in terminals at Dublin Port. Fuels for Ireland members have had to manage stock responsibly, even when that meant having to impose maximum volume limits for orders from bulk fuel customers. We have been consistently rebuilding stocks to normal commercial levels, but that means buying fuel at high wholesale prices. Wholesale prices were already increasing prior to the unjustified invasion of Ukraine and the levels of commercial stock were nowhere near the levels that were being widely reported. We must also recognise that the oil in storage has to be replenished and built up to normal levels and that replenishment has to happen at the wholesale rate on a given day.

We have worked with the Government and the National Oil Reserves Agency, NORA, to ensure that there is security of supply to Ireland throughout this period. While NORA keeps a minimum of 90 days stock of oil to be deployed in the event of a supply shortage, this may only be released by order of the Minister for the Environment, Climate and Communications. Even then, it is released at market rates. NORA, and its strategic fuels stocks, does not render the Irish market immune to international price spikes. At each step along the way, we have worked with NORA and a number of Departments to ensure that there has been clarity on fuel supply levels. We are grateful to officials from the Departments of the Environment, Climate and Communications and Transport and NORA for their determined efforts and deep engagement with industry to maintain security of supply. Despite the system coming under pressure at various points, we have ensured fuel has flowed to consumers and businesses, and assuming normal consumer behaviour, we are completely confident that this will continue.

This is the backdrop against which we have seen these price rises and, while it is encouraging to see respite on market prices in recent days, it is important to stress that further price volatility could occur. It may well be beyond our control. There has been great mischaracterisation of the work of the industry during this deeply uncertain time, and we are unhappy over how things have been portrayed in recent weeks, not least the inference that the industry has been engaged in any sort of profiteering. This is simply not the case.

This inference has come in addition to repeated messaging that the excise duty reduction, welcome though it was, would take effect from midnight on the night the reduction was announced. This could not possibly have happened. As was flagged by industry to Government in advance, excise had already been paid on supplies that were on forecourts at that point. It gave people a false impression that prices would reduce immediately and caused anger and frustration that was often directed at our colleagues. In the two days prior to the excise duty cut, the wholesale price of diesel according to Platts increased by approximately 20 cent per litre, while the excise duty decreased by 15 cent per litre. The effect of the excise duty cut was no more than a partial neutralisation of the price increases that had occurred in the two days before it was announced.

Further fiscal interventions seem likely to remain under consideration, including changes to VAT, which is applied to excise, levies and tax on fuel as well as the product itself. We ask that industry be involved in discussion of such policies to prevent similar misunderstandings to those that arose regarding the excise duty cut. Given the topic of this session is the rising cost of fuel, we need to recognise that this issue is not a short-term concern just borne out of the current tragic situation in Ukraine, but rather something that is more systemic and long-term. It is the policy of successive Irish and many other international governments to reduce the capacity to produce fuel and, ultimately, increase the price of fuel to consumers. This is justified by claims that by driving prices higher, demand for fossil fuels will drop, despite unrelentingly consistent and conclusive evidence to the contrary.

The reality, as shown in AA Ireland statistics, is that the price of fuel rose by 34% in the year to February 2022. This is the highest level of price change on record and, according to analysis of data in a soon to be published Grant Thornton report, some 62% of comprised taxes and subsidies. This proves the earlier point on price volatility leading into the present challenge and the level of Government taxation on fuels.

Our focus is on powering today and tomorrow. Fuels for Ireland and its members have made an unequivocal commitment to achieve carbon neutrality by 2050, not just for our own companies but to support Ireland in meeting this objective. We have repeatedly stated that fossil fuels cannot be the basis for Ireland's future energy plans or the business strategies of our members. We have already invested in EV charging networks that mean a greater proportion of Irish forecourts provide charging points than any other European country. We have spent years urging Government to double the biofuel component of petrol and are part of an industry that is investing its brightest minds and billions of euro into developing low- and no-carbon liquid fuels.

We talk of a just transition, but it often seems that we expect to switch fully from one state to another with no steps along the way. This risks leaving great swathes of people and businesses in Ireland behind. To pursue a policy of strategically increasing the price of fossil fuels in the belief that this will drive all toward EVs or heat pumps ignores the fact that those least able to bear the high entry costs to these technologies are those hardest hit by high fuel prices. With our focus on supplying the energy we need today and tomorrow, we believe there should be no penalties without realistic alternatives.

Analysis of the impact of Government fiscal and environmental policy on demand for fuel will soon be published by Grant Thornton. It will report that a price rise in fuel is more likely to impact deprived households and that rural dwellers on lower incomes are the most inelastic to fuel price fluctuations, needing to compromise on other spending to cover these price rises. In the context of this meeting and of the soon to be published report, it is our view that Government policy on fuel taxation should be comprehensively reviewed.

We welcome this opportunity to engage with the committee about how best we can continue to play our role in ensuring stability of supply and clarity on pricing and will always make ourselves available to Oireachtas committees and individual Members to inform political discussion on our sector.

Mr. David Blevings:

I thank the committee for the opportunity to address it. I am joined by four of our retail members. I thank the Chair for introducing them and I thank them for giving up their time to present to the committee. The Irish Petrol Retailers Association is a trade association for independent retailers in Ireland. We lobby on issues that affect our members and have no financial interest in or give any advice on pricing to our membership. Our members are mostly family-owned businesses who until recently were seen as essential workers during the pandemic and who worked tirelessly to keep services going for the nation. That positive view of retailers has been severely damaged in the past two weeks.

We have approximately 500 members across the Republic, who purchase fuel from the major oil companies based on the previous market day closing price. Retailers are emailed a daily wholesale price which gives them the purchase price of fuel for next-day delivery. On Monday the wholesale price shows the price for fuel on Tuesday delivery. Retailers have no control over wholesale pricing. The heightened political tensions resulting from the invasion of Ukraine and the package of economic sanctions imposed by the West in response resulted in an unprecedented increase in prices for crude oil, which led to increased prices for refined products, as most countries were concerned at the potential loss of Russian oil supply and the effect that would have on the market.

It is important to note that fuel retailers have no control over wholesale prices. If an increase is applied at wholesale level, the retailer has to pass this on to retain profitability. To not pass on increases would be commercial suicide. Regarding the claims of retailers gouging during the week of 7 March, our retail members on this call have advised us that on the two days - Tuesday, 8 March and Wednesday, 9 March - the market moved up approximately 11 cent per litre for unleaded and more than 18 cent per litre for diesel, meaning that retailers who purchased fuel on Wednesday, 9 March paid €2.03 per litre for diesel and €1.98 per litre for unleaded. On Thursday, that increased to €2.05 per litre for diesel and €2.17 per litre for unleaded. These prices were supplied by the retailers on this call and they can confirm that if required. When our members buy fuel, they commit to buying 38,000 litres per order and, depending on the size of the station and frequency of sales, that load of fuel could last up to a week as independents tend to be smaller sites selling lower volumes. In a volatile market, they cannot sell at a quick pace and have been stuck with a lot of fuel in the ground at very high prices.

When Government announced that excise cuts of 20 cent per litre and 15 cent per litre would take effect from Wednesday midnight, retailers could not implement this immediately without taking a huge hit and losing money on stock in the tanks. As an example, one of our members who is present advised that they bought fuel on Tuesday, 8 March before the excise cut and could not pass on the reductions. They sold the product at a loss, resulting in the loss of approximately €6,000 to €7,000 per site. During this difficult week, due to the messaging from Government, we saw widespread abuse of retailers, bordering on violence. Some retailers advised that their staff refused to come to work following the abuse they received from customers over the reported allegations of gouging and profiteering in the media.

We explained this to the Minister, Deputy Michael McGrath, and the Ministers of State, Deputies Troy and English, via a video call last Friday, 11 March and there was general acceptance that retailers who had bought fuel before the duty change could not have passed on the decrease until they sold what was in their tanks. We have asked for that to be clarified by Government but to date we have seen nothing in the media to support that. Government messaging should have followed up the call about the cut in excise duty with a statement that the decreases would not be immediate because of fuel in retailers' tanks purchased before the excise reduction.

Moving forward, it is imperative that Government engages with the sector before making such statements. While we welcome the excise cut, we believe reductions could go further. An obvious option would be to reduce VAT on fuel sales as this would be a clear benefit for consumers and, as it does not affect stock, a much easier proposal for retailers.

To conclude, retailers have no control over the price they pay for fuel and purchase it as required at the daily wholesale prices. With the war in Ukraine, supply problems and a shortage of diesel, most retailers increased their stock levels prior to the excise cut. The more stock retailers had in, the more they lost. The retailers suffer the loss when the Government reduces the excise duty as they have bought the stock in and paid the higher duty prior to the cut. Smaller retailers are worst affected as it takes them longer to sell a load of fuel if they bought it at the wrong price. They cannot afford to take the loss on a full load of 38,000 litres plus the stock in their tank. They cannot increase the price as they become uncompetitive at the pump with reduced sales, as well as the negative publicity when Government announced the price going down. A lag time must be allowed for retailers to change prices. The key question I hope we will address today is how we can stop this happening again. I thank the committee.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I move to members. I will have to enforce five minutes rigidly. I would appreciate if members kept an eye on the clock. If they come to four minutes, they know they have a minute left. It is great to have the key players in dealing with the public on the price of fuel, including AA Ireland, which keeps an eye on and oversees it, the wholesalers and the retailers, and to get that supply chain in so the public can understand.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I thank the witnesses for being here. I think it is Mr. McIlduff's first time as CEO so he is welcome. All the witnesses in the room and attending remotely are welcome. They will be surprised how fast the five minutes goes.

I take Mr. Blevings' point that when the Government introduces an excise duty cut, there is stuff in the tank. However, in the past when the price went up at normal budget time, presumably the stuff in the tank was bought prior to the excise increase yet the price always went up at midnight. Would it be fair to say that also needs to be looked at? Have IPRA members in the past benefitted from buying fuel at a lower price, selling it at the higher price after an excise cut and keeping the difference?

Mr. David Blevings:

I thank the Senator for the question. I do not think we have ever seen volatile pricing like this.

The pricing in the marketplace, as the representatives of the AA will probably tell the committee, is very competitive. Once a retailer in an area starts to move his or her prices up or down, the others will follow. It has been a difficult time for the retailers. I would not say there has been a time when retailers have purposely kept their prices high. At the end of the day, competitive forces will bring that product price down.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I take those points. We all shop around and look at the prices on pumps.ieand various other things. What if suppliers have petrol in their tanks and a budget increase happens? Do those suppliers get the benefit of those increases? If they apply a price increase at midnight, they would benefit from whatever small difference there is between what they paid for the petrol and what they charge for it.

Mr. David Blevings:

Inevitably if there is small increase, they would probably benefit. At the end of the day, we are dealing with exceptional circumstances.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I take that point. I just wanted to clarify the other point. I thank Mr. Blevings. That is the case. There are much more volatile movements now than we see on a budget day and I take that point.

Mr. Mcllduff mentioned that 12% of journeys in urban areas are made by public transport but only 1.9% of journeys in thinly populated areas are made by public transport. Some 83% of journeys in thinly populated areas are made in cars. Are 15% of rural journeys taken by people walking or cycling? That must be the case. It is obviously much more difficult to do that in rural areas, where distances are much greater and facilities are more sparse. Where do the witnesses think the answer lies? Do we need different settlement patterns? The houses are there and people are living in them. What can we do to facilitate people living in those areas, in particular?

Electric cars will have an effect. Some 12% of cars are now electric, which is a significant increase in a short period. Our guests might tell us the figures for last year and the year before that. However, many people are not in a position to buy a new car. At the rate at which electric cars are being purchased, where will our vehicle stock be in 2030? I know that prices are falling and over time, there will be an increase in the sales of EVs. Are we anywhere near where we are supposed to be? Based on what we are doing now, where will we be in 2030? How will the reality compare with our targets?

Mr. Tom McIlduff:

The figures for electric cars last year were around-----

Mr. Paddy Comyn:

Approximately 5% or 6% of the cars sold were electric.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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That figure has doubled but remains small. Are approximately 100,000 new cars sold per year?

Mr. Tom McIlduff:

It depends on the year.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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Is that figure correct, roughly speaking?

Mr. Tom McIlduff:

Yes.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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How many vehicles are in the country's fleet? Are there approximately 2 million?

Mr. Tom McIlduff:

Approximately 2.2 million.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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New cars are approximately 5% of the fleet. Is that fair to say?

Mr. Tom McIlduff:

If the average car lasts approximately ten years, that is fair to say.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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On that basis, if only 5% of the fleet is new and only one eighth of that is electric, we will not get anywhere close to widespread EV provision anytime soon. I see Mr. Blevings reacting. I do not know if he is agreeing with me or shaking his head.

Mr. David Blevings:

I am agreeing with the Senator. I do not think the numbers stack up. The urban-rural divide is a major issue. There are all sorts of issues, including the provision of charging points for EVs in rural areas. That is a big issue that needs to be looked at.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I have not even touched on range anxiety. Mr. McIlduff mentioned the price of oil in his statement but I do not think he referenced the difference between the dollar and euro cost, which is a major and relevant matter. Our guests are the experts in motoring; I am not. I declare an interest in that I buy my insurance through the AA, and I thank the company for that. I need to hear more from the representatives of the AA, not about the problems but about the solutions. How do we, as legislators, and the public help? Perhaps our guests could suggest solutions rather than outlining the problems.

Mr. Tom McIlduff:

The AA does not feel it is its position to give the full solution to the industry and the Government. We believe that any changes that need to happen in any aspect of this need to be considered as part of a broader set of transport policies that address rural public transport, electric vehicles and fuel duty. Talking about or addressing any one of those items independently does not allow us to address our overall challenges. We believe the answer to the problem is to consider these matters in a truly integrated way and to prepare a properly integrated transport policy for Ireland.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I thank our guests for being here. I take the point made by the petrol retailers. We were all annoyed at the rate of increases and we saw the cost go up before it came back down. The retailers have articulated their point well. The more solutions and suggestions they have for us the better.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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I thank our guests for being with us. Senator Horkan's questions and Mr. Blevings' answers helped to clarify matters. There is a need for clarification around the cost being experienced by the consumer and Mr. Blevings gave a good explanation. However, there was, and is, annoyance. I hope that the witnesses can see why that frustration and annoyance was felt. We need greater transparency on that matter.

Senator Horkan mentioned price increases at midnight on budget night and the fact that petrol that is already in the tank still goes up in price. That is a matter we need to take cognisance of.

Mr. McIlduff spoke about the movement towards EVs. He said that 12% of the stock of cars is electric. Is the Government on the right trajectory for the electrification of the motor vehicle fleet?

Mr. Tom McIlduff:

To clarify, that is 12% of new cars sold and not 12% of the fleet. As we mentioned, that rate means we are probably not on the right trajectory to hit the targets for 2030.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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On the basis of that answer and the earlier comment that electric cars remain out of the reach of many, what can the Government do to put us on the right trajectory? The figure of 12% applies to new cars. How can the Government move back onto the correct roadmap towards the electrification of the motor fleet?

Mr. Tom McIlduff:

As I said, we do not believe it is the role of the AA to give that advice to Government. What we can say is that we believe the answer to that question needs to be considered as part of a broader transport policy. We must consider all different aspects of transport, including EVs, public transport, roads, etc. By addressing any individual point, the contribution of all those other aspects is missed. A proper integrated transport policy is the correct way forward.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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That is what we are trying to do. However, an integrated and positive transport policy can be difficult to attain for rural Ireland, given that people in those areas may be a distance from a bus stop or bus service.

Mr. McPartlan mentioned overdependence on Russian oil. Surely the nub of the problem is that we do not have an integrated strategy and are overly reliant on Russian oil.

Mr. Tom McIlduff:

A fully integrated transport policy that addresses all individuals, including motorists and customers making journeys across Ireland, is the correct approach to this issue.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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May I ask Mr. McPartlan one quick question about his contribution? I thank him for his contribution. He mentioned NORA and the issue of the 90-day stock. Should the stock be for more than 90 days?

Mr. Kevin McPartlan:

That is matter for the Government. The level we are required to hold is, as I understand it, a matter of international treaty law. The Government probably could make a decision to hold more than that. However, if we try to do that quickly, NORA would be buying stock at the current very high prices and it would be a remarkable expenditure for the Government to move beyond 90 days' supply.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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Do our guests have any comments on carbon tax? Should its application go ahead or be delayed? Should it go ahead in May?

Mr. Kevin McPartlan:

I am happy to answer that. The difference with carbon tax is that it is at least hypothecated. It is ring-fenced for use on carbon-reduction measures, which makes sense, and it is applied equally to all energy sources. If the Government wants to make changes to taxation, which is a matter for it and not us, it would make sense for it to consider alterations to the VAT and excise duties that already apply.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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Would anybody else like to comment on that to give us an overarching view?

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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On carbon tax.

Mr. Tom McIlduff:

I refer the Senator to my previous statement. All those issues need to be addressed in an integrated way.

Mr. David Blevings:

I concur with Mr. McPartlan. I would much rather see a focus on VAT and excise duty as an initial measure.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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I thank the witnesses for that. The last contribution is telling in that it is about the future and how we can ensure that we move towards a different type of automobile economy. It is also a matter of the committee considering the fighting on the back. From his engagement with the Government, does Mr. Blevings believe we could be successful in this regard?

Mr. David Blevings:

It depends on the Government’s mood and how it wants to respond to consumers. It would be a positive move and would be welcomed by consumers. The Government should give serious thought to further reductions. They would be well received by the public.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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Has there been any other engagement with Mr. Blevings’ counterparts in Europe on the change to the VAT rate and so on?

Mr. David Blevings:

Not that I am aware. Most have considered reducing the excise component, which is very welcome, but the VAT element would be much easier for retailers to deal with.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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I thank the witnesses. This engagement is important. There is a need for us to engage further and to have greater transparency on the issue of pricing. There was much frustration and anger among consumers. I know from talking to retailers in Cork that there was also a lot of anger and frustration on their side. To be fair, we are all caught in the storm that is the crisis we are in. In everything we do, we must think of the people of Ukraine, who are being treated so appallingly, and the tragic loss of life. We stand with the people of Ukraine, but at the same time we have a duty here to protect our consumers. I thank our guests for their engagement.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Today is really about getting to the facts. I note the frustration that both Mr. McPartlan and Mr. Blevings are expressing on behalf of the public regarding fuel prices. I wanted to get to the heart of the matter so I drove last Monday to petrol stations in my constituency. I got to nearly all of the ones in Limerick city. My constituency covers Limerick city, east Limerick and a bit of north Tipperary. I found that of 32 petrol stations, 29 had offered serious price reductions. Their prices were below the national average. I found that three of the 32 stations were charging €1.99 - virtually €2 - per litre of diesel and €1.89.9 cent for petrol, which is just short of €1.90. Those stations were associated with a certain supplier of fuel that I will not name. In other stations with the same supplier, the prices, instead of being €1.99.9 and €1.89.9 for diesel and petrol, respectively, were €1.83.9 and €1.79.9, respectively, resulting in differentials of 16 cent per litre of diesel and 10 cent per litre of petrol. Three petrol stations in Limerick are giving a bad name to the other 29, which were passing on reductions.

My first question is for Mr. Blevings. How is this happening? Is anyone overseeing the price of petrol and diesel at the pumps? Well over 90% of petrol stations were very consistent in passing on the excise reduction for petrol and diesel, but three were outliers. Two were serious outliers, charging nearly €2 per litre of diesel. This means that there was no passing on of the excise reduction. Nearly €1.90 was being charged for a litre of petrol. Is there anyone who oversees the pricing in Mr. Blevings’ sector?

My next question is from Mr. McPartlan. How does the supplier issue arise?

Perhaps Mr. Blevings will deal with my next point. It is approximately 12 days since the excise duty reductions were introduced. I fail to see how the petrol and diesel in the tanks would not be used up within a 12-day cycle and, therefore, how come a small few outliers are giving a bad name to the vast majority of petrol retailers who are providing an excellent service to the public? I invite Mr. Blevings to answer first, followed by Mr. McPartlan.

Mr. David Blevings:

I do not know the stations the Chairman is referring to. On his first point, a retailer is free to set the pole price as he or she sees fit and will do so depending on both the competitiveness in the area and when the stock was bought. The stations in question could be small. They might have stock and might not-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I will not mention their names but they are two large stations. Does anyone oversee the price? Is it purely a commercial decision of the retailer?

Mr. David Blevings:

Again, retailers set their own pole prices depending on their profitability schedules, profits and losses, and what they want to do in the year. It depends on what they buy from the wholesaler and when the stock is put in place. To answer the question, the retailer sets his or her own pole price.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Can Mr. McPartlan explain why two different petrol stations with the same supplier have different diesel prices? Does his organisation, along with the providers or wholesalers, look at the prices the retailers charge? What is happening is that a very small number of retailers are engaging in what looks to me like price gouging, thus doing a huge disservice to the other petrol retailers throughout Ireland.

Mr. Kevin McPartlan:

The Chairman mentioned that he did the research on 21 March, which was four days after the excise duty-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I did it last Monday, on 21 March, just two days ago.

Mr. Kevin McPartlan:

It may well be that stock is held for up to a week, but 21 March is-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Twelve days.

Mr. Kevin McPartlan:

That is fine. As Mr. Blevings said, individual operators set their own prices. The fact that a particular brand name is displayed at the forecourt does not necessarily mean the brand owns and operates the forecourt; it can be done on a franchise basis. Without knowing the details, I cannot comment. I would not be able to comment even if I did know the details about an individual forecourt. The Chairman talked about his desire to deal in pure facts. From 1 January until 14 March, the average price of diesel globally went up 24%. In Ireland, it went up by 21%, which was less than the global average.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I am aware of that. What I want to focus on is the mechanics. If the wholesaler sets the price-----

Mr. David Blevings:

We do not set the price; we cannot set the price. It would be anti-competitive if we set the price.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The wholesaler sets the price at which the fuel is supplied to the retailer.

Mr. Kevin McPartlan:

We sell at a wholesale price.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Typically, the rate is determined two days prior to delivery.

Mr. Kevin McPartlan:

It can be very complex. I do not want to try to muddy the waters too much, but it could well be that the price paid by the forecourt is set two days in advance of the fuel being sold on the forecourt.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The only person who has no control is the consumer.

Mr. Kevin McPartlan:

That is not the case. We have no control over international commodity prices. We have to buy on the international markets.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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But the wholesaler can decide the price charged to the retailer.

Mr. Kevin McPartlan:

Yes, but are we going to decide to sell at a loss? The margins on fuel are really tiny.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I accept all that. A majority are passing on the reduction and a small few are clearly not. Charging €1.99.9, which is effectively €2, per litre of diesel is not passing on the reduction.

Charging nearly €1.90 per litre for petrol, it is not passing on the rate 12 days after the reduction came. Can anything be done to ensure those particular operators pass the reduction on, or is that entirely a commercial decision by them?

Mr. Kevin McPartlan:

It would be unlawful for the wholesalers to do that. I can tell the Chairman unequivocally that every Fuels for Ireland member passed on the excise duty reduction at 12.01 a.m. on Thursday, 10 March, without any hesitation at every point in the supply chain that we have control over.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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My next question is for Mr. Blevings. Typically, how long would it take for a retailer to use supplies? What would be the longest it would take? Does it take a day, two days or three days to replenish their supplies?

Mr. David Blevings:

That is an impossible question to answer. Every station has a different volume of tankage, etc.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What is it typically?

Mr. David Blevings:

One of our retail members, Mr. McSorley, wants to come in on that. He will be able to give a better explanation.

Mr. Martin McSorley:

The Chairman asked some questions and I would like to clear a few things up for him. Just because the wholesale price is one price that does not mean that every retailer buys at that wholesale price. An independent retailer has a supply deal with a wholesaler. I have seven sites. My supply deal would be nicer than somebody who has one site. They would pay much more for their fuel than I would, buying for seven sites.

The Chairman spoke about the price being very high on Monday. I bought fuel this morning. If I sell the fuel that I bought this morning without putting any margin on it, I would be selling it at €1.96 per litre. The Chairman asked how much people can hold. Three of my sites currently have stock that has been in the ground since 8 March. I have had to reduce my price so low that I am taking a 19 cent hit on that and I still cannot sell it.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Is that because of the location of that petrol station?

Mr. Martin McSorley:

That is because other retailers around us who are in a different situation from us have been able to reduce their prices. I am an independent retailer. I have what is called a retail margin. It is typically 5 cent a litre and no more than that. Other businesses have a wholesale margin plus a retail margin and they are in a better situation to be able to adjust their prices.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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With the reductions in excise duty, surely the prices of diesel at €2 a litre and petrol at €1.90 per litre are too high when compared with all the other petrol stations in an area where they appear to be much lower.

Mr. Martin McSorley:

The diesel that I bought this morning for two of my sites I will need to sell at €1.99.9 tomorrow morning to make a margin.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Is Mr. McSorley selling at a lower price in his other sites?

Mr. Martin McSorley:

At other sites we are selling at €1.88 and €1.85. However, as those stocks run out and we replace them with stock later this week, they will also rise up towards €2.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I accept that, but I was looking at it last Monday.

Mr. Martin McSorley:

I know but the price was increasing throughout last week. The price increased last night by 6 cent per litre. It will increase again tonight. It increased the other night by 2 cent. It has been rising since the drop in excise duty. It had sat for about two or three days with very small changes, but in the past couple of days it has risen. If that retailer was selling the stock that he brought in on Monday morning, then he is right. He is just about making his margin.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Surely there is an inconsistency there given that all the other retailers in Limerick city and around are selling at a much lower rate.

Mr. Martin McSorley:

No, it depends on when they got it in. It also depends on whether they are a wholesaler that owns that site and selling fuel; they are buying it at considerably cheaper than the rest. I have seven sites and I have seven different wholesale prices. Each site has a different wholesale price. How much extra I am charged for transport depends on how far away from the depot I am.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Mr. McSorley will appreciate that the public question it when they see this. I was amazed at what I found at 29 of the 33 petrol stations in different locations. I take the point he has made, but the public question it when they see such disparities with a 17 cent difference between the lowest and highest prices for diesel.

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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I do not want to go over ground that has been covered. I would like to get some short-term, medium-term and long-term forecasts from the witnesses. I know they are hard to do. There is speculation that fuel could go to €3 per litre. Is that figure far off the mark? It is a scary figure. There is enormous volatility, which is having an immediate impact on individuals and businesses. I would like to hear the views of people who deal with this every day of the week. I do not mind who answers that question.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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We might start with Mr. McPartlan. Two of Mr. Blevings's colleagues were indicating earlier but I had run out of time. We might get them to come in on it.

Mr. Kevin McPartlan:

My answer will be quick. Things have been so volatile with such extreme fluctuations that it would be foolish to try to make any great predictions other than to say that traditionally we would always have looked at the price of crude oil per barrel as an indicator of what the trends are likely to be two or three weeks hence. However, things have fluctuated so wildly that this is no longer a reliable indicator. Platts is the body that provides international objective monitoring of wholesale prices. The trends can be seen there. That is where we are likely to see the best indicator. Even that is very short term and will only provide the impact over the next week.

Right now, there is a two-tier international wholesale market: a market for those who are prepared to buy Russian fuel and a market for everybody else. People who are prepared to buy Russian fuel get wholesale prices far lower.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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How much lower?

Mr. Kevin McPartlan:

I could not say given how volatile it is. It is substantial.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Would it be of the order of 20% or 30% lower?

Mr. Kevin McPartlan:

I would not want to mislead the Chairman by pretending I know; I do not. However, it is substantially lower. If we are going to take the approach, as Fuels for Ireland members have, that we do not wish to support the Russian regime by supporting its economy, then we are paying higher than the prices quoted by Platts at the moment.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I now call Ms McCaughey, followed by Mr. Cronin.

Ms Raylene McCaughey:

The Chairman spoke about price differences in Limerick. I do not know the station involved.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I will not name it.

Ms Raylene McCaughey:

We bought fuel last Wednesday, which cost us €2.04 per litre. There is a high possibility that the station the Chairman referred to, could still have that fuel in its tanks. From Thursday, the day after we bought it, our sales dropped to below half. Ours is not the biggest or smallest in the country. We are on a national main route and so it is a busy enough service station. Sales halved because of the false advertisement. We could not take it down and we could not put it up any more than we did so we were taking a hit on it.

To clarify your comments, Chairman, the filling station to which you referred could very well have had a load of fuel that it had bought in at €2.04 still in its tanks, 12 days later, because sales just plummeted.

Mr. Declan Cronin:

I will make just two comments. First, I am looking up the price of diesel on 16 March, which was seven days ago. It cost us €1.70 per litre. Today the same diesel is costing us €1.87 per litre and we are selling it for €1.89 per litre, so-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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That is a 17 cent increase.

Mr. Declan Cronin:

It is a 17 cent increase between 16 March and 23 March. Each weekday we get a different price. Many retailers are nearly afraid to put up their prices now, so we are selling fuel at two prices at the moment.

My second point is a general question. I have been in this business a while and have been through two fuel shortages. At the moment, in Europe, there is a shortage of diesel. Has the transport committee a plan for diesel? Diesel is essential for our country, its workforce and so on. It looks like there is a shortage of refined diesel in Europe. I think it is even worse than the most recent fuel shortages because there are fewer refineries in Europe than there used to be, so the supply chain, I believe, is weaker than it used to be. The UK is now down to six refineries, and I think one of those supplies Ireland with half our fuel.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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We will bring Mr. McPartlan in on that. What is the security of supply of diesel? He might address petrol as well.

Mr. Kevin McPartlan:

The security of supply has certainly improved. As I said, when we were coming into this crisis we were at a really low ebb, and when-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Is that for both diesel and petrol or just diesel?

Mr. Kevin McPartlan:

Particularly for diesel-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Why is that?

Mr. Kevin McPartlan:

-----but also for petrol. We had those storms, which prevented unloading and, in turn, meant we were down to low levels. Then we had a period when the price rises were extremely sharp almost daily. That meant that people tried, perfectly reasonably, to get ahead of the price rises. Instead of waiting until the weekend, they decided they would fill up before then. Instead of buying €50 worth of fuel, they decided they would buy €70 worth.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Have many European countries switched from gas to diesel, and is that causing the pressure Mr. Cronin talks about?

Mr. Kevin McPartlan:

That broader point is really important because it was traditionally the case for a couple of decades that the price of diesel was on average maybe 10 cent lower per litre than the price of petrol. That has been reversed now. The reason for that is that, traditionally, decades ago, the refineries in Europe produced mainly petrol because that was our predominant fuel. When we in Europe moved more to diesel, we did not have sufficient refineries for that, so we were a net exporter of petrol and a net importer of diesel, and a lot of those imports came from Russia. Therefore, when we try to take Russia out of the equation, it puts a real squeeze on diesel in particular to the point that we had, as I mentioned, just one day's supply-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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On Mr. Cronin's broader point, what is the security of supply of diesel over the next 12 months?

Mr. Kevin McPartlan:

The security of supply comes in two parts: whether we can get the fuel and then how much we have to pay for it. The Russian fuel that was coming into Europe is now being diverted. It is going to India, China and other countries. We are now having to reroute or to find new routes to bring fuel into this country. That means increased prices and increased costs to us. Shipping from the Middle East, for example, is more expensive than bringing products through from Russia, whereby they are dropped off in Rotterdam or the UK first. That supply chain is settling into a new pattern now. We are not quite there but we will get there and we will have security of supply in being able to get product. We have to recognise, however, that this product is likely to cost us more than it used to cost us.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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How much will the cost go up over the next 12 months?

Mr. Kevin McPartlan:

I simply cannot say. Even if I had an idea, it could be considered price signalling were I to share it, and I would not do that, but I do not have an idea.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What is Mr. McIlduff's response to Deputy Carey's question?

Mr. Tom McIlduff:

I support all the other comments made. As we said in our statement, there is a significant level of volatility in the market and, therefore, it is absolutely impossible to make any predictions as to where fuel prices will go other than to say the future is uncertain.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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I thank all the witnesses. Mr. Blevings said many workers were put under significant duress by frustrated members of the public. We cannot condone that. We extend solidarity to ordinary workers trying to go about their business.

May I ask Mr. McPartlan a question about the Irish market? What is the nature of it? How many big players are there? How many players are there overall? What percentage of the market do the top five or six players control? There is significant variation among the witnesses. We have heard of the single operator working directly with a refinery versus other operators. What is the picture like, particularly in respect of a healthy, competitive market?

Mr. Kevin McPartlan:

I really appreciate the Deputy's comments of solidarity with the front-line workers because those people have had a really tough time for the past two years during the Covid pandemic. They were showing up every day and then got this torrent of abuse. It was fuelled by some really - I will be charitable - mistaken commentary. I appreciate the Deputy's comments and I think our colleagues will too.

I will give the Deputy a couple of snapshots that might answer his point. Approximately half the forecourts operating in Ireland are what we describe as company-owned, company-operated, that is, they are owned by the large brand names, members of Fuels for Ireland that operate those sites. If I say they make up 57% of all forecourts, they tend to be the busiest sites, so by volume of fuel the percentage is probably higher. They probably sell 60% of the total fuel sold.

In response to the Deputy's question about market share, I had the good luck to watch the enterprise committee meeting this morning, at which the Competition and Consumer Protection Commission, CCPC, said that, according to its data, the four largest fuel companies control approximately 50% of the market.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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The witnesses have articulated their position. However, if we go further up the food chain, we know that big international oil and fuel companies are reporting super profits, a crisis-related excess of profits. The European Union has responded and indicated how that should provide options to the Government to deal with it. Will that be the case for the big providers in Ireland? Will they report crisis-related excessive profits at the end of this year compared with previous years? That is the public's real concern.

Mr. Kevin McPartlan:

I get the concern. It is that hard-pressed consumers are now spending 50% more to fill their cars than they were spending a year ago. I get that that is frustrating, but that does not necessarily mean that the people selling that fuel are "gouging" people, to use language that has been used today. It reflects the market conditions. In response to the specific question about the global oil majors, the Ukraine situation is four weeks old. I do not believe that any financial reporting can accurately say what the impact of those four weeks has been at this point. Specifically, do I think that Fuels for Ireland members will report bumper profits as a result of this? Absolutely not. As the committee has heard from some of the independent retailers, just as they took a bath, to use a colloquialism, on prices immediately after the excise duty cut, it is very likely that some of the majors also took serious losses in the immediate term to try, first, to meet consumer expectations that prices were going to come down and, second, to protect their staff from the abuse and threats we have talked about. That decision was influenced by the situation. When we had more than one Cabinet Minister standing at a podium telling people they could expect price reductions at midnight that night when they knew - or, if they did not, they should have known - that was not true.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What is the earliest the retail operators would have seen price reductions?

Mr. Kevin McPartlan:

The very earliest would have been the next day at some point, if somebody had a delivery come in at 6 a.m.

The taxation point is when it leaves the terminal. If a truck leaves at 3 a.m. and delivers somewhere close by at 6 a.m.-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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It could be-----

Mr. Kevin McPartlan:

It could but equally, as the committee has heard from one of the independent retailers, it could be ten days later.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The price the retailer has on the day it is brought in is based on a price set the previous day.

Mr. Kevin McPartlan:

Yes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Therefore, there is no way it would ever come through on the day after.

Mr. Kevin McPartlan:

Precisely.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The earliest it could have come through was the following day.

Mr. Kevin McPartlan:

Yes, and succeeding days.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The retailers would have to have had an empty tank from the previous day-----

Mr. Kevin McPartlan:

Yes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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-----in essence.

Mr. Kevin McPartlan:

We also have to recognise the global prices were changing even at that stage.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Typically if there are further reductions in VAT or excise what would be the earliest that retailers would see it? Is it two or three days later on average?

Mr. Kevin McPartlan:

It depends on where that change happens. If it happens with VAT, my understanding is the taxation point for VAT is at the point of sale. Therefore, it would be immediate. The point of excise taxation is when it leaves the bonded warehouse. In our case this is the terminal.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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My question is for Mr. Blevings. From his perspective, what is the nature of competition? Are independent retailers getting squeezed? Do they see the big players moving in? What is his perspective on the nature of competition in the industry in Ireland?

Mr. David Blevings:

I ask Mr. McSorley, as a retailer, to speak to this if he is happy to take the question.

Mr. Martin McSorley:

Before I answer that question I will reply to the previous question. The profit we make on fuel is per litre. If I sell a litre at €1 or €2 I make 5 cent. It does not matter what the price is. I do not make a percentage of the selling price. We will not see excess profits being made by anybody. The Government is making more because it gets a percentage of VAT. As the price rises it gets more but we do not. We get the exact same no matter what. We will make less because since this has happened our volumes have decreased by more than half. I have a site that was doing 35,000 l a week and it is now doing 14,000 l a week because I cannot sell the stock that is in the ground.

When it comes to competition I fear the 500 members of the IPRA will not be available to meet the committee in five years because most of them will be gone. The reason for this is we cannot survive on the small margins we are getting. We are losing volume year after year. Bigger operations are wiping us out. Other than this, we are also being absolutely destroyed by overheads. Earlier we spoke about electric cars. Five years ago, I was paying 17 cent a unit for electricity; now I am paying 40 cent. The electricity bill on my site in Wexford has increased from €36,000 in 2017 to €110,000 this year. With increases like this, electric cars will eventually not be profitable either because it will cost a fortune to charge them.

Mr. Declan Cronin:

The 20 cent discount the Government has been more than eroded by the price increases of petrol and diesel. To come back to my original question, has the committee done analysis on where all the fuel arriving into Ireland comes from? No more than with regard to food supply chain, I am concerned that we are very dependent on a few refineries. If one of them goes out of action for whatever reason then 50% of our supply could be gone in the morning.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What is the process by which petrol and diesel come into Ireland? Who brings it in? Who is it bought from?

Mr. Kevin McPartlan:

At present we have one refinery in Ireland, which is Whitegate in Cork. From memory it produces 30% to 40% of our total fuel required in the country. It also produces biodiesel. The rest comes in as finished product. This is a globally fungible commodity. I heard a story today of a ship that was going to Argentina but got turned around in the middle of the Atlantic and brought back to the UK because that was where the deal was best for it. It will come from wherever it is needed. We have to recognise what this might mean. We have existing supply chains, relationships and suppliers. In a number of cases we are trying to unwind from these because of connections to Russia. We do not want to support that regime. We must now find new ones. This is happening. For some of them it may be with regard to a supplier. It may be "O'Rourke oil" in North America or the Middle East. It may be a broker.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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To answer Mr. Cronin's specific question, we have not done so to date but we will do it now because it is coming very much into focus. At the core of his question is security of supply and where we stand as a the country. It is a matter the committee will take up and we will do a structured body of work around it. Today we are dealing with the specific issue on the rising cost of fuel. Mr. Cronin's point on the supply side is very well made. The committee will commit to working on this immediately.

Mr. Declan Cronin:

I thank the Chair.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I thank the witnesses for coming before the committee. I have several questions. I do not know which of the witnesses deals with the hackers hauling oil from the port in Dublin. Is it Mr. McPartlan who deals with oil tankers or is it the filling stations?

Mr. Kevin McPartlan:

It could be either. Is the Deputy Fitzmaurice speaking about a major haulier?

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I will ask the question. One morning a large operator quoted a price of €1.40 a litre for green diesel and €1.35 for kerosene. When I spoke on Leaders' Questions at 12.55 p.m. that day these were the prices. That evening, the prices increased to €1.50 and €1.45. The following morning, the prices were increased to €1.60 and €1.55.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What date was this?

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It was recently on a day I spoke on Leaders' Questions.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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It was recent.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It was in the past few weeks. The following morning the price was €1.60 per litre. That oil company did not import oil from foreign seas on four different occasions that day. It was able to sell green diesel to a person in Sligo at €1.20 per litre even though it was advertising it online at €1.60. What type of gouging was that in the green diesel sector?

Mr. Kevin McPartlan:

I reject the characterisation of it being gouging at all.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It is gouging in my opinion because that is the fact. I looked at it. I was at a meeting of plant contractors that evening in Mullingar. A group of people was looking at what went on that day. Can anyone justify it?

Mr. Kevin McPartlan:

Respectfully, what is a fact is that the price rose very sharply.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It did not rise four times in the one day.

Mr. Kevin McPartlan:

I am not sure how the Deputy can say that.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I know that because I know other oil companies. A guy living beside me hauls oil and I speak to him regularly.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Is this one specific oil company?

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Yes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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We will not name it.

Mr. Kevin McPartlan:

I can certainly say there are sites that have more than four deliveries a day. It is entirely possible that people were buying at different prices within a day. This is entirely unprecedented in our industry. It was certainly happening-----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It was able to sell the same oil to someone at €1.20 a litre even though it was quoting a price of €1.60. How could it do this? It sold diesel to a contractor at €1.20 even though the price quoted online was €1.60.

Mr. Kevin McPartlan:

Perhaps it had a contract that required it.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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No, it did not. There was no contract.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The Deputy is saying it had two different prices.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I have the proof of it.

Mr. Kevin McPartlan:

I do not know how to answer the Deputy.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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That is what has gone on around the country. I am a contractor. I buy a fair bit of diesel and I know what went on.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Is the Deputy's point that a supplier of fuel was charging two different prices to two different customers?

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I have explained that on the morning I did Leaders' Questions, which were replied to by the Tánaiste, the prices were €1.30 and €1.25. The prices then increased to €1.40 and €1.35. That evening I was in Mullingar at meeting of plant contractors. The prices increased that evening and the following morning. The Chair can Google it on his phone and get the quotes.

I talked to a guy in Sligo the next morning and he told me that the price of diesel was going mad. I asked him what he paid for it and he told me. I smiled to myself because I had looked at this. If that is not gouging, I am a Dutch man. That is the first thing I have to say.

Second, the witness spoke about NORA in the context of supplies. Is it true that a new owner of 30% of NORA has taken over or that part of the reserves that we have in this country have been sold in the last few weeks?

Mr. Kevin McPartlan:

NORA is State-owned so there is no 30% owner-----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Yes, I know that but there are companies that store the fuel for NORA. Is that right?

Mr. Kevin McPartlan:

Yes.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Is it true that there was a sale of part of the portfolio somewhere in Ringsend to an English company? Is that right?

Mr. Kevin McPartlan:

That would be a matter for NORA. I do not know.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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On petrol, when I was knee-high to a grasshopper, there was always a ten cent difference between the price of diesel and petrol. While Mr. McPartlan was talking I googled the number of diesel cars in Europe which has reduced since 2016. I also looked up the number of petrol cars but there does not seem to be much of a variation in the number of petrol cars. Mr. McPartlan spoke about refineries. It is my understanding that petrol is the highest grade fuel taken from refineries. Why has it changed during this period only? Why did it not change two weeks ago or two months before this bang came?

Mr. Kevin McPartlan:

Our reliance on Russia was far higher for diesel than for petrol. We were not reliant-----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Let us look at the percentages, with all due respect. What percentage of oil was coming into Europe from Russia in comparison to the Middle East, for example?

Mr. Kevin McPartlan:

In the EU, 29% of oil came from Russia -----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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How much Russian oil was coming to Ireland?

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It was 4%.

Mr. Kevin McPartlan:

That is not really the issue. I do not know -----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It is my understanding that it was 4%.

Mr. Kevin McPartlan:

That is not the issue. We are not a single market. Also, in terms of the fuel coming into the EU, we are competing with other EU countries to buy that fuel. We are bidding against other EU countries and we are on the periphery, so it costs more to get it here than to mainland Europe. The fact that we were not actually getting molecules from Russia is not, with respect, the most important point. The most important point is the increase in the demand and the decrease in supply, which is being felt on a macro level.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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My understanding is that the EU stated that it would not block Russian imports. Why did Mr. McPartlan say that we were stopping them?

Mr. Kevin McPartlan:

There are no formal sanctions currently but a number of companies have taken the decision to unwind from contracts with Russia.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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If the EU would not do it, why would fuel companies decide to do it? The EU decided, for security of fuel supply in every country, that it would not ban Russian fuel imports but would, down the road, try to move away from them. Why, in that context, have fuel companies taken that decision? The EU decided, for the betterment of its people, not to do it. It would ban Russian fuel imports if it could, in my opinion, but inflation is going to beat us.

We already have contracts in place with countries in the Middle East to import oil. Why is it so difficult to find new markets or new sources of oil? Markets already exist from which we can source oil.

Mr. Kevin McPartlan:

To go back to Deputy Fitzmaurice's question as to why individual companies have made that decision, many have done so on the basis of consumer sentiment. People do not want to support Russia and they want to show solidarity with Ukraine. Individual companies are also taking that approach off their own bat, not just in response to consumer sentiment.

On the question of whether there are other markets from which we can get product, the answer is Yes. That is the change that is happening now. That has already begun to happen. As I mentioned, Russia is in a market of its own right now. It is selling to people who are prepared to deal with it. As members will have seen at the weekend, there was a massive order of Russian oil from India so the fuel which was going into India is now available on global markets. We are looking at bringing that into this country. However, that does sometimes mean further shipping.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Before it was reduced, the duty difference between white and green diesel was something like 65 cent. Is that correct? It was either 65 cent or 67 cent and it came down by 15 cent. Why, for the week or two of price craziness, did it come to within 20 cent and 25 cent? Why were people quoted €1,000 for 500 litres of home heating oil when they could buy white diesel for that? Why were contractors quoted €1.60 or even €1.70 when they could buy white diesel, even at the high price at which they had to import it? Why was this gap closed overnight? What was going on in the market?

How many companies import oil directly into Ireland? It is my understanding that there are two or three-----

Mr. Kevin McPartlan:

There are seven and they are NORA-obligated parties.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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If Mr. McPartlan could answer the question on the green diesel and kerosene, I would be much obliged because I am at a loss as to what happened there.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Perhaps Mr. McPartlan will follow up-----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Chairman, with all due respect, we need answers. There was always a 65 cent difference, no matter what-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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My apologies, Deputy. I ask Mr. McPartlan to answer that.

Mr. Kevin McPartlan:

The Deputy is asking me to answer a question about one company-----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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No, I am not. I am talking about all companies. This is not new news. This was right around Ireland-----

Mr. Kevin McPartlan:

On the one hand Deputy Fitzmaurice is telling me that he got information that the price was €1.60 and he was able to talk to someone in a different part of the country the following day and the price was lower. We are saying that there was a broad range-----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Wait one second. I have outlined another scenario that happened in Ireland during that crazy two weeks. First, as Mr. McPartlan said earlier, supplies were rationed. In the first week, the drivers of lorries were told that the price would be €800 to €830 for kerosene for home heating. That went up to €1,000 for 500 litres, which is €2 per litre. Green diesel was also rationed. The price was set at €800 but some people had to pay more. Why did that happen when the original difference was 65 cent? Even when the Government took the 15 cent off, which was welcome, the gap was still wrong.

Mr. Kevin McPartlan:

The 15 cent was not taken off agricultural diesel.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I am not saying that it was. I am talking about the 65 cent difference that should always be there. At €2, if one adds 65 cent, then it should be €2.65 but it never went above €2.25. There is something wrong-----

Mr. Kevin McPartlan:

I think the presumption that there must be a 65 cent differential is not based on facts.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It is excise. That is the difference between white diesel and green diesel. Is that not right?

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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In a situation where there is a difference in the excise on normal and green diesel, why was the differential in price much less than-----

Mr. Kevin McPartlan:

Sorry, I misunderstood the question. With the different grades of fuel, the supply chains are different. If one looks at the work NORA has done over the last period, it has looked at the stock levels of agricultural diesel separately to road diesel. There have been differences in the supply levels at different times. There have been pinches on agricultural diesel at different times and it may well have been a reflection of that.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It could not be reflective of that because Mr. McPartlan said earlier that NORA released it at the market price-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I am sorry Deputy but we must move on because we are under time pressure. Deputy Ó Murchú is next.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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I apologise for leaving the meeting earlier but I had to speak in the Dáil Chamber.

In terms of fuel, it all comes down to supply and price. We all got calls about the prices at the pumps. We also got calls from certain retailers who pointed out the issues at play. Mr. Blevings appeared on various media and provided some degree of clarity. It is the case that in the middle of any crisis there will be individuals who try to make use of it.

There are a number of levels and stages in the fuel supply chain in Ireland.

Pricing is straightforward. The witnesses have all said it. The European Commission says that the VAT rate, specifically, can be changed. We will make arguments that it does not make sense to add to carbon taxes at this time, but VAT is the game changer. The price on the market at that point will be taken into account.

There is a question about supply. Companies are making moves and have reoriented themselves. They are getting out ahead of what is coming anyway. The reality is that we are trying to cut off what we can of the money supply to Russia. Another reality is that Russia will find other places to sell. There have been multiple conversations about what the issue with supply is. I previously heard that oil suppliers were saying that they would make use of this period and that oil prices had not been great for long time, so now was an opportunity to make money, whether it is coming from Venezuela, Saudi Arabia, or elsewhere. Will Mr. McPartlan go into detail about the interaction that there has been and the varying levels of the supply chain to Ireland? We are talking about diesel, petrol and crude oil, as opposed to gas, which will probably be much more complicated.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Will Mr. McPartlan go through the process of the supply chain and how diesel, oil and petrol come into Ireland? Who are the suppliers?

Mr. Kevin McPartlan:

Crude oil is an internationally traded commodity that comes from all over the world and needs to go to a refinery. It is bought for the day price. We are all used to seeing the barrel price being reported. It is then sent to a refinery. We have to add the biofuel element, which is required. That might explain Deputy Fitzmaurice's question. There is no biofuel element in agricultural diesel. There are currency fluctuations, because oil barrels are priced in dollars, whereas we sell in euro. It has to be refined and shipped to wherever it needs to go. If we are buying from North America, Scandinavia or the Middle East, it has to be shipped to Ireland, stored in terminals here and sold on.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Is that by individual oil companies?

Mr. Kevin McPartlan:

Yes. In response to Deputy Ó Murchú's question about oil majors-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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There are seven of those in Ireland.

Mr. Kevin McPartlan:

None of what we describe as oil majors, which are the big global companies such as Shell and BP, are in Ireland. They all came out of the Irish market. No members of Fuels For Ireland are in that territory at all. We have mainly Irish-owned companies. They are family-owned in a number of cases. There are a couple of multinationals. We do not have big global oil majors in Ireland. They are not our members. I cannot speak for what they may be doing. Our members are buying on international markets. That includes refineries buying crude oil to process, which incurs a cost and uses substantial energy. As energy costs have increased, the cost of refining oil has increased significantly. That has been a significant part of the global increase.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Who owns the refinery?

Mr. Kevin McPartlan:

The refinery in Cork is owned by a Canadian-owned company called Irving Oil.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Does it buy the oil in directly?

Mr. Kevin McPartlan:

Yes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Does it then sell it on to Fuels For Ireland members?

Mr. Kevin McPartlan:

It would refine it, add the biofuel and all the different parts.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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It provides for 30% to 40% of the market.

Mr. Kevin McPartlan:

Yes. Some companies represented by Fuels For Ireland import. Some do not and are just retailers. Some are distributors and others are focused more on home heating oil than petrol and diesel. There is a broad mix.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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We are having to look in different places to a degree. Everybody across Europe is fighting for the same supply and it takes time to ramp up. I understand that we need to move to renewables, but we will not be able to introduce the volume of wind energy needed overnight, even if everything goes correctly from here on. Is there sufficient supply for us at this point? I understand there will be price issues. Is the suggestion that the oil majors will use this opportunity correct? In the long term, people will move away from oil and oil prices have not been high for a while, so now is the chance to make money.

Mr. Kevin McPartlan:

I do not think I could say that it is. Just as when our prices are increasing, we object to people saying that we are price-gouging because we know what is actually going on behind it, I would not know enough about what they are doing to answer that question properly.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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I base the questions on commentary I have heard on it.

Mr. Kevin McPartlan:

To answer the question about security of supply, we are confident that, as the global market changes to meet the new reality and people unwind from Russian suppliers and look for other suppliers, we will keep the security of supply. The difficulty is how much it will cost.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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That is down to all those other factors. Does Mr. McPartlan have any interaction with regard to the security of the gas supply?

Mr. Kevin McPartlan:

I do not.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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I believe that will probably be a greater problem. There is a discussion across Europe about regulation of prices at government level. It is getting close to needing to happen here. While I accept that everyone's business still needs to operate, what is Mr. McPartlan's view on that? I imagine it is not a straightforward process, but it is beginning to happen. There are windfall taxes on energy providers and so on.

Mr. Kevin McPartlan:

I understand that the regulation of prices for energy would be contrary to European law, but I may be wrong.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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Mr. McPartlan is entirely correct, but it is a conversation that is happening.

Mr. Kevin McPartlan:

I was speaking to one of my members earlier who worked in a jurisdiction where prices were regulated. He said it was the most profitable market that the company operated in.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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It depends on what way it is regulated. Mr. McPartlan mentioned many links in the supply chain, which all have to remain profitable and stay afloat. He said there is a plentiful supply to ensure security. We are not in danger from that. There was a two-week period where everyone was getting calls, which Mr. McPartlan spoke about himself, about there only being a day's supply or nothing at all left in Dublin Port.

Mr. Kevin McPartlan:

The focus for the industry in the first three weeks of this crisis period was security of supply. It was our concern and the concern of Government.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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Did fear lead to increased demand?

Mr. Kevin McPartlan:

The Deputy may recall what happened in Britain last summer where there was a problem with supply. There was plenty of stock in Britain. Panic-buying created a problem. If the same thing happened here, we would have been in real trouble.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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It is the equivalent of a run on a bank.

Mr. Kevin McPartlan:

Exactly.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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How much of the retail market is owned by the oil companies, selling directly to the end consumers? There is a wholesale price and a retail price. They would be selling directly.

Mr. Kevin McPartlan:

Between 40% and 50%.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The independents have 50%. I see Mr. Blevings and Mr. Cronin here. I know Mr. McSorley referred to a margin of 5%. What is the margin on diesel and petrol? Why is there a differential between petrol and diesel? In my survey in Limerick, I found that it varied from 11 cent per litre to no difference at all in price. What margins are companies making on petrol and diesel? Why is there a disparity at petrol pumps in the margins they make? Do they have any problems with supply from oil wholesalers?

Mr. Martin McSorley:

The margin we make is typically 5 cent. On a good day, it might be 6 cent.

The reason some sites are selling and buying at the same price and some are selling with a difference is on some days it was the same price to buy it. If someone bought stock on the 9 March, there was a 10 cent difference between the two. However, if he or she bought it on the 8 March, there was only a 3 cent difference between the two. That is why they are selling it on that way.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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On security of supply, are there any problems with suppliers and a shortage of supplies?

Mr. Martin McSorley:

On diesel and unleaded, we have not had any issue - perhaps for a day or two at the beginning, but that was quickly rectified. On green diesel, marked gas oil, MGO, and kerosene, we have not been able to get any stock for seven days.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Christ, Irish petrol retailers have not been able to get any stock for seven days.

Mr. Martin McSorley:

No. five of our suppliers told us last week they could not give us any. One supplier offered us 500 litres.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Why is that? Would that fall to Mr. McPartlan's members?

Mr. Kevin McPartlan:

It would. There are a couple of reasons. If a person has a contract to buy his or her kerosene from a particular supplier, that supplier has an obligation to supply him or her. If somebody is buying on the spot market, there is no obligation. While supplies have been tight, they have been meeting their contractual obligations. That has certainly happened. I am aware that some haulage companies, for example, have experienced that problem of not being able to get diesel for that same reason. That may explain the issue that Mr. McSorley is having.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Does that worry Mr. McSorley at the moment?

Mr. Martin McSorley:

It is a small part of our business, so it does not worry us as much as long as we have diesel and unleaded, which is the main part of our business. The kerosene and MGO is small. Stock will come back. We are being told we will get stock this week. It is not a big part.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Will Mr. Cronin answer the same questions?

Mr. Declan Cronin:

There are a couple of issues in the discussion. We have to separate out the price of the barrel of oil and the price of the refined product. Out of a barrel of oil, there is so many percentage petrol, diesel, paraffin or whatever can be got out of a barrel. Due to the increased demand over the past number of weeks in the likes of kerosene, paraffin and even agricultural diesel, the tanks of many major supplies that come into Ireland ran low, so there was a shortage of some of those products.

There are two comments I would like to make. One is on the smaller retailers around the country. I was brought up in this business in Cork and I have no doubt that in the next 20 years many of the small retailers in rural areas will go out of business because there is no profit in selling petrol and diesel.

In terms of the refined product coming into Ireland, my belief is we are too dependent on a few refiners. Over the past number of years, the big major suppliers such as Shell, BP and all of those companies left Ireland. They had a supply source because they had their own refineries. Now I believe only one company in Ireland has a refinery that is actually supplying to Ireland, and they are supplying many of the companies. That is what I am asking for research to be done into that. We could easily have a short supply of some of these products in the morning, as was shown in the past few weeks.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I would like to acknowledge the difficulties for staff of Mr. McPartlan's members and, more particularly, the retailers. It should not have happened. There is huge frustration among the public. There is a need for very concise and clear messaging on any further changes in the price in terms of taxes. It is something we will take up. We are going into the next session now. The main point is that this is the start of a process. The next phase is for the Government to get scope in Europe to be able to flex on the VAT rate, which is a huge component of the price of diesel and petrol.

I thank the witnesses for appearing at this session. It has been, in its own way, quite illuminating. We look forward to further engagement with them. We will now take a short break to bring in the witnesses for the second session on the rising cost of food. Thank you all very much.

Sitting suspended at 3.25 p.m. and resumed at 3.31 p.m.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The purpose of the meeting is to discuss the rising cost of fuel. The meeting is taking place over two sessions and this is the second session. I thank the witnesses for their patience and forbearance. It is great to see such a large turnout and it shows how important the issue is. On behalf of the committee, I welcome, from the Irish Road Haulage Association: Mr. Eugene Drennan, president; Mr. Paul Jackman, vice president; Mr. Brendan Ryan, management; and Ms Paula Monagle; from the Freight Transport Association of Ireland: Mr. Aidan Flynn, CEO; from the Chartered Institute of Logistics and Transport: Mr. Joe Kenny, CEO; and Ms Katie Wheeler, events and marketing officer; and from the Coach Tourism and Transport Council of Ireland: Mr. William Martin, Martin's Coaches, Limerick; Mr. J.J. Kavanagh, Kavanagh's, Kilkenny; and Mr. Brendan Crowley, Wexford Bus.

All witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.

For witnesses attending remotely outside the Leinster House complex, there are some limitations to parliamentary privilege. As such, they may not benefit from the same level of immunity from legal proceedings as a witness physically present does. Witnesses participating in this committee session from a jurisdiction outside the State are advised that they should also be mindful the domestic law and how it may apply to the evidence they give.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses of the Oireachtas or an official either by name or in such a way as to make him or her identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. I will not permit members to participate where they are not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask members partaking via MS Teams that, prior to making their contribution to the meeting, they confirm they are on the grounds of the Leinster House campus. If attending in the committee room, all are asked to exercise personal responsibility in protecting themselves and others from the risk of contracting Covid-19.

I note that Deputy Verona Murphy is substituting for Deputy Lowry, who is a member of our committee. The format is that members speak first in the rota and then the substitutes for members, and other non-members are then facilitated to speak. I know it is a tall ask but I ask the witnesses to confine the summary of their statements to five minutes because I am conscious we have quite a number of witnesses and we want to have time for discussion. We will continue until roughly 4.45 p.m. as I will push it out from 4.30 p.m., so we have that bit of extra time.

I call Mr. Drennan to make his opening statement on behalf of the Irish Road Haulage Association.

Mr. Eugene Drennan:

I thank members for the opportunity to appear before the committee. I am president of the Irish Road Haulage Association, IRHA. It is no exaggeration for me to state that the licensed road haulage sector is in a serious existential crisis at present. The ever-increasing hikes in fuel costs have been hitting our sector for many months now and are coming on top of operating conditions that are already extremely challenging. Brexit, driver shortages and Covid-19 constraints on operations have built up a perfect storm for our members, their colleagues and families. The ever-increasing costs of running a licensed haulage business are forcing people out of the sector and forcing some members to park up their trucks. The sector is fiercely competitive and members are finding limited opportunities to recover increased costs from their customers. Members are also facing huge uncertainty about the future, given the ongoing dependence on diesel-powered vehicles for the medium term, with a Government that flatly refuses to recognise this reality. The Minister, Deputy Eamon Ryan, seems to want to wish away diesel from our economy by imposing penal taxes on the essential fuel used for heavy goods vehicles, HGVs, but has not presented any realistic alternatives to our members.

It is vital to fully understand the important role that licensed haulage plays in our economy and society. Licensed hauliers are literally the wheels that keep the economy moving. Our members bring goods to and from Ireland and play an important role in the distribution of goods and the supply chain, ensuring that homes, businesses and essential services are able to function effectively. Any loss in the effective functioning of our national haulage fleet will directly impact on many areas of our economy. Therefore, it is disheartening to hear about well-established and long-standing licensed hauliers who are getting out of the business or downsizing their operations. Given the high-cost operating environment and the uncertain future, they cannot make their business pay for them.

We have made strong representations to the Government about the high cost of fuel. We welcome the recent announcement of an interim relief scheme to licensed hauliers to meet extra fuel costs. This payment was around an additive, AdBlue, and sought to ease the burden of high prices. The payment of €100 per week for each HGV on the road for an eight-week period will assist the sector in the short term but it is very much only a stop-gap measure. We also met the Minister for Finance and put different scenarios to him, and we subsequently got the 15 cent decrease, which is very welcome and which I acknowledge. However, sticking-plaster solutions only push the problem down the road and provide no assurance to licensed hauliers that the Government gets the problem and is prepared to address the matter comprehensively.

In order to address high fuel prices and other operating costs for our sector, the Government needs to give sufficient fuel rebates to licensed hauliers as essential users of diesel. We have argued with the Government that the current diesel rebate scheme needs to be recalibrated to ensure it is an effective support for a key sector of the economy. We have indicated to the Government the levels of change required in the existing diesel rebate scheme but there is no indication that the Government will move on this issue. The blind opposition to fossil fuel subsidies is preventing the Minister, Deputy Eamon Ryan, from looking at reconfiguring the scheme to a more workable alternative which can also help to reduce costs and emissions.

We need to implement the significant fuel saving measures which we have presented to the Government as a means of reducing fuel consumption. These are very simple initiatives that could make a significant difference to the amount of fuel used, such as altering traffic light sequences in urban areas, creating a toll-free channel for HGVs at toll booths and changing the operating hours for depots at ports. Each of these initiatives would help to reduce fuel consumption, reduce costs and reduce emissions. We need to support the transition of the national HGV fleet to more fuel-efficient options. This is a no-brainer but, regrettably, we are running up against a brick wall on this issue.

There is no acceptance in government of the stark reality that diesel will remain the key transmission source for licensed hauliers operating HGVs out to the medium term. There is no substitute fuel source available to the sector at present and no indication of one emerging in the medium term. The Government needs to remove the doctrinal objection to diesel as a fossil fuel and instead change the focus to securing the lowest emissions possible and the highest fuel efficiency from diesel vehicles. Modern fuel technologies mean that HGVs can now use diesel and achieve the lowest possible emission levels for CO2, NOx and SOx, as well as achieving high levels of fuel efficiency.

The Irish Road Haulage Association would warmly welcome it if this committee could act as an interlocutor on the issue of fuel costs and the future of this vital sector. All too often, we are told that specific measures cannot be taken because of potential objections at EU level. Yet, when we examine matters directly in Brussels and look at measures adopted in other member states, we find that Irish Government objections do not stand up.

There is nothing at EU level stopping the Irish Government from introducing a new diesel rebate scheme that acknowledges our sector as essential users of diesel. Similar schemes exist in Holland, Belgium, Spain, Italy and France. Such a scheme can also form part of initiatives to move the fleet to a low-carbon, low-emission and fuel-efficient future but this will require the Government accepting that diesel will be the fuel of necessity for our sector for at least the next ten years. Put simply, there is no viable alternative at present or coming from HGV manufacturers over the medium term.

It is also important to point out at this juncture the reason we are harping on so much about how we only have the choice of diesel. Even if other alternative fuels become available, we cannot leave the island on ferries because the other fuels are effectively a bomb going on the ferry. The channel tunnel recently totally stopped accepting gas in any proportion, or hydrogen if it should happen to be available. We cannot get to the markets other than with diesel.

Heads need to be banged together to come up with workable and practical suggestions and outcomes, which we presented to the Ministers, Deputies Donohoe and Eamon Ryan, recently, that can assist the sector while also meeting Government objectives on climate change. We can meet our targets if we are helped. Workable and practical outcomes can be achieved to avert the current crisis and bring this sector to a sustainable and viable future. These measures can tackle high fuel costs for our members as essential users of diesel and can support the transition of the sector to a low-carbon future.

I thank the Chairman. That concludes our opening statement.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I thank Mr. Drennan. We now move to Mr. Flynn, who has five minutes.

Mr. Aidan Flynn:

I wish the committee a good afternoon. My name is Aidan Flynn, chief executive of the Freight Transport Association of Ireland, FTAI. The FTAI is a not-for-profit membership trade association for the Irish freight, passenger and logistics industries. We welcome the opportunity to present to the Joint Committee on Transport and Communications on the topic of the rising cost of fuel at a time when fluctuating fuel prices are having a significant negative impact on businesses, which is feeding into increased inflation to consumers.

Ireland's supply chain and passenger service sector must be protected from sharp and spiralling increases in fuel costs. The volatility in the fuel markets was evident in the final quarter of 2021 and has been growing in intensity since. Since October 2021, the European Commission put in place the legal framework that enables the EU and its member states to take action to address the effect of sudden price fluctuations due to the increased spike in energy costs, attributed at the time to increased energy usage spikes due to global economic recovery. Two of the main recommendations were to provide temporary, targeted reductions in taxation rates for vulnerable households and to provide aid to companies or industry in line with EU state aid rules.

We welcome interventions to date such as the 15 cent reduction in excise duty on diesel and the emergency measure of the €100 grant per vehicle for vehicles listed on a road haulage operator licence. The question must be asked, however, as to why the coach and bus sector and the own-account sectors were excluded from this emergency provision. The Government must become more flexible and proactive in dealing with the fuel crisis we are experiencing at the moment. It has taken until the eleventh hour, some five months after the European Commission’s intervention, to see action by the Irish Government, which is frustrating for all in the transport and logistics sector. We need a dynamic and flexible approach to deal with exceptional circumstances.

In the 2021 FTAI submission on the ten-year haulage strategy to the Department of Transport, we suggested that a subgroup of the Government task force on emergency planning should be created to have representation from the freight distribution and logistics sector as we deem it essential in ensuring comprehensive preparations for, and response to, all emergencies. We submitted that this subgroup should include the Department of Transport and key stakeholders within the logistics sector, and that the subgroup should commence work immediately and form part of the national emergency planning in the event of future pandemics as well as, for example, disaster planning around fuel shortages and natural disasters.

Having dealt with the emergency brought about by Covid-19 and the consequences of Brexit, the pressures on the freight distribution and logistics sector are again intensifying due to the increases in energy prices, evidenced by the volatility of the price of a barrel of oil, which breached $140 per barrel in an intense week of trading recently. It has since decreased in price; I think it is $117 today. However, the average price per barrel of Brent oil is currently approximately $97 per barrel. To put this in context, in March 2021, the average price of a barrel of oil was $65; a 48% differential.

Wildly fluctuating fuel pricing, while not a regular occurrence, creates panic and unnecessary uncertainty in the market for both the consumer and essential service users. It is critical that essential services are ring-fenced and protected from such volatility. Recently, transport operations were limited to the volume of product they could purchase; not because of supply issues per se but because of the hourly volatility in price fluctuation. This unpredictability feeds uncertainty around security of supply and availability of product at affordable prices.

Commercial fleet operators come in many guises, operating across all industries including haulage, manufacturing, retail, warehouse and distribution, construction, private and public passenger transport, security, telecommunications etc. Currently, there are more than 40,000 Irish registered heavy goods vehicles greater than 3.5 tonnes. Of that number, 21,437 vehicles are included in the 3,812

road haulage operator licences issued by the State. The average-size haulage operator has five and a half trucks.

The own-account HGV operations are identifiable as being involved in the movement of their own goods, not for hire and reward, such as fuel distribution, retail distribution, local authorities, waste management services and so on. There are 1,542 large public service vehicle, LPSV, licensed operators in Ireland, with a total of just over 12,000 coaches and buses in the fleet. This is an average of 7.79 buses per operator. Understanding the size of commercial fleets, including the differentiation between the haulage sector and the own-account sector, is important in aiding our understanding of the necessary supports for mainly small to medium-sized businesses without distorting the competitive forces that deliver efficient and profitable logistics services.

Benchmarking operational costs is a key ingredient in aiding businesses in our industry to develop robust business plans that support decision-making and enhance profitability and competitiveness. The FTAI publishes an annual report called the Manager's Guide to Distribution Costs.This is an industry-wide survey examining the costs associated with personnel, operational, maintenance and fuel costs of commercial fleet operators in the haulage and logistics sector.

According to this guide, fuel accounts for more than 41% of operational costs for articulated vehicle fleets and just under 25% of rigid vehicle costs. The most recent report identified the average fuel cost per kilometre at 33 cent at a time when the average price per litre was €1.33. We have seen the price of a litre of diesel increase significantly by more than 40% in the past 12 months. This is having the impact of increasing that cost per kilometre to 46 cent. This increase is crippling for those who do not have fuel surcharges built into their contracts but also is damaging to freight distribution cash flow, particularly when the curve of fuels prices has a constant upward and steep trajectory.

The FTAI has repeatedly advised the Government to review the current diesel rebate scheme to make it more accessible and fit for purpose to alleviate some of the pressures on the haulage and public service vehicle, PSV, sector. There are challenges with the current system with less than one third of qualifying operators actively participating in the scheme. This scheme must also be broadened to include the own-account sector, which is responsible for most of the national retail and food and energy supply services distribution.

Currently, the rebate scheme provides a 7.5 cent per litre rebate, which is payable three months after the fuel has been purchased with certain terms and conditions applying. The scheme should be made more efficient to support cash flow for operators and, particularly in exceptional periods such as we are currently experiencing, should be flexible enough to facilitate monthly claims and payments. It should also be renamed and extended to include alternative fuels such as compressed natural gas.

Of course, we are not here today to suggest that the Government must do everything to provide subvention for our industry. We want to highlight the work that is being done by our members and others in operating in a professional manner while striving for recognition. Solidarity within the supply chain and passenger services is also essential in protecting the sustainability and viability of essential service providers. It is imperative that the burden of increased costs is shared, thus mitigating the risk to service provision, developing fair competition and, critically, security of service.

Why, for instance, should haulage operators be fully responsible for the increasing rate of carbon tax? Currently, carbon tax accounts for 8.5 cent per litre of diesel. This is increasing to 11 cent in May and will increase year-on-year until it is 71 cent per litre in 2050. The purchasers of these services have an influence on the environmental impact through the contracting of their freight distribution services.

It must become the norm that these costs are considered in a professional and engaging manner where all parties understand the realities and pressures of operating effective and efficient logistics and passenger services. Developing more transparency and guidance for industry on fuel pricing will support and aid this reality. The quarterly diesel repayment rate is calculated using the national average purchase price. The Central Statistics Office, CSO, provides this information. It is this rate that is referenced by the Revenue Commissioners.

The CSO could publish more frequent updates on fuel pricing that could become the reference de facto for fuel escalator agreements. The public sector should lead by example in support of fuel escalator arrangements and guidance should be available to all to support progressive and fair contract arrangements that will ultimately spread the risk of fuel inflation and share the burden of increased carbon taxes.

Since 2014 the FTAI has promoted, and in recent years run, a CO2 reduction programme. This is our TruckSafe green certificate programme, which is funded through the energy efficiency obligation scheme and regulated by the SEAI. This recognises hauliers and commercial fleet operators for their performance improvement based on primary measured data submitted quarterly. To summarise the results of the overall programme for the period 2014 to 2020, we have avoided 89,000 tonnes of CO2 emissions, more than €750,000 has been paid out to licensed operators for demonstrating reductions in fuel consumption and there have been more than €56 million in savings from avoided fuel use.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I am conscious of time and I ask Mr. Flynn to conclude.

Mr. Aidan Flynn:

I will finish now. In addition to what we firmly believe the Government must do to support our industry during this energy crisis, we also have proposals on how we as an industry can support and work with one another to alleviate some of these pressures, increase confidence in supply of services and spread the risk through the supply chain and passenger service operations. We must all take collective responsibility to deliver a fair and balanced marketplace. It is critical that everything is done to maintain security of supply and stability of price for essential service providers.

Mr. Joe Kenny:

On behalf of the Chartered Institute of Logistics and Transport, CILT, Ireland. I thank the committee for the opportunity to address it today. I am the chief executive officer of CILT Ireland. CILT is the globally recognised professional members body for all professionals involved in the mobility and supply chain industries. We are an independent membership body operating in more than 40 countries and representing more than 30,000 professionals globally. We promote and support professionalism and enhanced standards.

CILT Ireland recognises the difficulties for our sector arising from increasing fuel costs. These difficulties need to be set against an already incredibly challenging and fast-changing environment brought about by the global pandemic and Brexit. The supply chain industry is still adjusting to the enormous changes forced upon it by these events and now finds itself also affected by the volatility in part brought about by the tragic situation evolving in Ukraine. The combined effects of these highly-disruptive events are felt right across the sector in all modes, road, rail, air and maritime. All parts of the supply chain have needed to adapt and introduce new methods of operations to maintain supplies and services. Passenger as well as freight movements have been affected and the industry's ability to move people and goods economically has been challenged as never before.

CILT Ireland believes that the long-term solution to the issues facing the industry is in a sustainable approach to decarbonisation for the industry, aligned with clear transitional plans and combined with higher levels of professionalisation, education and training programmes, and the adoption of innovative technology. This strategic approach will require appropriate plans and supports to transition from a reliance on carbon-based fuels, as well as a whole-of-industry approach to professionalisation so that standards, capacity, and sustainability are prioritised. A sustainable approach may require the reassessment of lowest-cost solutions and a reduction in proprietary and exclusive distribution lines, for example.

Collaboration and shared resources are key to the long-term success of the industry with a recognition that much of the industry is made up of smaller independent operators who usually do not have significant economic or financial influence. These smaller operations may not have the same ability to adapt, often because of contractual obligations, and survive in adverse conditions. This must be recognised by industry as well as the customers it serves. There is potential to improve the shared understanding of costs, contracts and the business environment within the sector.

There is a need to develop practical and viable plans for all parts of the supply chain utilising industry professionals who can help industry adapt to the inevitable unforeseen circumstances. Strategic planning covering input security, sustainable supply chains, decarbonisation targets and economic sustainability are crucial to the success of the industry. Investment in training and education and the promotion of professionalisation and standards will be required. The knowledge, skills and analysis which professional bodies such as CILT can contribute can be leveraged in the short, medium and long term.

The current volatility in fuel prices highlights several key challenges that require addressing. Security and sustainability of supply chains and the impacts of rising input costs on the economy are two of the most important. CILT Ireland recognises that short-term measures will be required but believes that only a strategic response using appropriate policy instruments is now needed to effectively deal with the problem. The current crisis is a symptom of the much larger challenge to decarbonise our sector.

The latest environmental package, Fit for 55, in the European Green Deal published in 2021 has set out a vision to make Europe carbon neutral by 2050. For the road transport sector, the emphasis is on alternative and cleaner energy fuels for all vehicles, intending to phase out the sale of internal combustion engines vehicles for heavy goods vehicles, HGVs, no later than 2040. Based on the latest CILT Ireland policy research, we would like to bring to the attention to the committee two main findings. There is a divergence between the Government's incentivised decarbonisation direction and the industry's preferences, which might hinder the uptake of cleaner vehicles among heavy duty vehicle, HDV, and HGV operators. The current decarbonisation policies indicate a trend towards electrification for the transport sector in general. However, the study shows that operators consider hydrogen and biofuel as more feasible options. Given the limited market choice and technological support availability, electrification might not be a feasible option for HDV and HGV operators in the near term. In addition, the high upfront investment of cleaner vehicles and the availability of the infrastructure throughout the country are also significant barriers.

The current Government policies on transport decarbonisation are less reflected in terms of measures and support schemes for most SMEs in the market. Small and micro companies are significant elements of the transport industry in Ireland, similar to the European context. They are aware of green technologies but less interested in adopting these green practices in their operations or participating in the current decarbonisation schemes. During the engagement with the transport operators in this study, a sense of being overwhelmed has been felt. The operators are preoccupied with ongoing workloads and hardly have the capacity or resources to make a strategic plan for decarbonisation in their operations.

Mr. J.J. Kavanagh:

I thank the Chair and committee members for inviting the Coach Tourism and Transport Council of Ireland, CTTC, to appear before them today to address the crucial issue of the spiralling fuel costs currently crippling the industry. We are delighted with this opportunity, which will allow us to outline the detrimental impact of the crisis on the bus and coach industry and the integral role the sector can play in alleviating the cost of living crisis for many. I am joined by Mr. William Martin and Mr. Brendan Crowley, who are fellow executive council members of the CTTC. I acknowledge the desire of the CTTC to work in tandem with the Government in addressing this crisis. We are Ireland's largest representative body for the private bus and coach sector, with a comprehensive membership spanning mostly indigenous family-run operators, working across scheduled services, international tours, private hire and school transport.

The private bus and coach sector is an integral part of Ireland's national transport network, and collectively the sector is responsible for carrying more than 75 million passengers per year, helping to sustain 11,000 direct jobs and contributing in excess of €600 million to our national economy. Private operators are responsible for attracting one fifth of all tourists who visit Ireland annually. This has an enormously positive impact on regional retailers, hospitality outlets, visitor attractions and other relevant businesses throughout the country.

The sector is also largely responsible for the provision of school transport, with more than 90% of the 41 million school journeys being carried out by private operators. On an annual basis, more than 120,000 children are transported to their place of education on 7,000 different bus routes to 3,000 separate schools. As such, commercial operators are an essential foundation stone of the Irish transport network, and the smooth carriage of thousands of passengers and school commuters remains dependent on the viability of the sector.

The recent invasion of Ukraine has resulted in soaring fuel costs that continue to rise at a level which, simply put, is unsustainable for the sector. Having spent the past two years grappling with the unprecedented reduction in passenger levels as a result of the Covid-19 pandemic, we are now in the midst of another crisis, which is pushing the sector to the brink of collapse. For the most part, commercial operators have been left with little choice but to absorb the financial repercussions of crippling fuel costs. While scheduled service operators with direct award contracts have the benefit of fuel variation clauses contained therein, which help to insulate operators to an extent, this status quoends in June. Correspondingly, the situation is somewhat bleak for coach tour operators and school transport providers. This is owing to the fact that many of these operators have signed up to contracts, either with Bus Éireann or private tourism companies, for previously agreed rates. In some cases these last for up to five years. They are now unviable, unworkable and, worse still, they threaten the livelihood of these businesses.

In particular, the lack of alignment in State contracts and Government procurement is troubling and we need to see legally enforceable fuel variation clauses introduced in school transport contract in order that operators have protection against extreme variations in fuel costs. They currently do not have this. Fuel variation clauses are a progressive means of protecting all parties to a contract and essentially, act as a safeguard against the risk and uncertainty associated with the sudden change in the price of essential materials needed to give effect to the contractual obligations. These clauses are designed to support sectors and industries that are susceptible to external events and beyond the control of the parties. They allow for prices to rise or fall as the relevant circumstances prevail, which gives a large degree of certainty and comfort to all.

Many of our members are at the forefront of school transport and a recent research survey bleakly highlighted the impact of external events on the sector. Two thirds of operators have seen fuel costs increase by up to 60% over the course of the past 12 months, 90% of operators need up to a 35% increase in contract rates to continue to operate their services and 95% of school transport providers are unable to guarantee service provision up until the end of the academic year in June.

Furthermore, the coach tourism sector in Ireland is facing a competitiveness issue as the country is at the higher price range for visitors and given recent events, it will be increasingly challenging to continue to position Ireland as an attractive tourist destination. This in turn risks jeopardising our once-thriving international and domestic tourism markets, responsible for independently attracting 2 million tourists, and threatens the viability of thousands of businesses and jobs across the country.

The fact of the matter is that every facet of public transport has been impacted by pre-existing contracted rates which if not resolved, will have a detrimental impact on congestion, our decarbonisation ambitions and strategic transport provision across the country. Commercial bus companies cannot continue to provide the same level of service and maintain current schedules while grappling with an average 50% to 60% increase in the price of fuel. Given the majority of our members operate routes outside of Dublin any adverse impacts on general service provision will have a disproportionate impact on the regions.

In order to alleviate the worst impacts on general route delivery and service provision, the Government needs to implement a number of crucial policies without delay. It should reduce VAT on fuel to 9%. This worked very well for the hospitality sector when it was in crisis and a similar policy must be adopted to safeguard the mass transportation sector during a time of extraordinary financial hardship. Just last week, the CTTC wrote to the Government recommending a temporary reduction in VAT, the details of which can be worked out in consultation with industry stakeholders. The Government should align all State transport contracts to ensure the inclusion of fuel variation clauses, which will insulate school transport operators against further diesel hikes, which are expected. The Government should introduce a special fund for embattled coach tourism operators that have pre-existing contractual arrangements in place with international tour companies in order that they can continue to attract millions of international visitors this year. The Government should encourage members of the public to take public transport as a means of offsetting the cost of living crisis. Buses serve as a feasible solution while offering crucial regional connectivity. This would alleviates city congestion and would help to reduce the country’s carbon emissions. In ordinary times, buses are a cost-effective transport option for commuters and collectively, our sector has a vital role to play in helping Ireland to realise its sustainability objectives. It is imperative we safeguard this.

One full coach takes 40 cars off the road. As a country, we should be deploying every available incentive and strategy, to encourage a modal shift away from private vehicles towards public transport and I acknowledge the crucial steps taken by the Government so far in this regard. However, asking operators to shoulder the financial burden of crippling fuel costs is the antithesis of this and as absorbing these price shocks will ultimately undermine efforts by operators to electrify their fleets, we also need to look at ways and means to facilitate this transition in a meaningful way by enabling commercial operators unfettered access to purchase EVs. Without essential support at this time, the industry will be in jeopardy, which will render the 2050 zero emissions target impossible.

At the outset, I was keen to emphasise the CTTC’s desire to engage proactively with the Government, in seeking to address this crisis. It is in that same spirit that I thank the committee for this opportunity to contribute. We look forward to answering any questions that members may have.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I thank Mr. Kavanagh. I will move to members. Each will have five minutes. I ask them to get to their questions quickly. I will cut at five minutes because four minutes is too short but five should be sufficient. I want to be fair to our guests and ensure they are asked the appropriate questions. If people are making speeches I want them to go straight into questions because we must be out of here by 4.45 p.m. or 4.50 p.m. or the clerk to the committee will have me up in court - that is his job. I ask members to go straight to their questions so we get the requests from our guests that we as a committee can take to the Government and the Department. Senator Horkan is first.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I thank the Cathaoirleach, and much as I might want to see him in court, I will try to avoid being too much over the time limit.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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No liberties today. This one I am going to strictly enforce.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I normally give huge liberties but we are caught for time and I want to be fair to our guests.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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We will be watching the Cathaoirleach's five minutes too.

I thank all our guests for being here. They are all under enormous pressure and we can see that in their opening statements. No business can sustain these levels of price increases. One of the questions I have, which applies to all the sectors, concerns fuel as a percentage of the cost base. What is it and what are the margins generally? I do not want the operators giving away massive commercial secrets but the margins here are quite tight. In Mr. Kavanagh's case, what would fuel generally be as a percentage of his total costs? What would the margins generally be? Are we facing situations with many operators where what were profitable scenarios are becoming loss-making all over the place?

Mr. J.J. Kavanagh:

It is certainly turning a profit-making business into a loss-making situation. Six months ago, fuel for an ordinary commuter route involving a 400 km round trip cost approximately €150. It is now costing €225. You either increase fares, increase patronage or you go out of business. Increasing fares is not an option at this stage because there is a lot of pressure on people who want to commute and travel. Many Government initiatives are actually working in the opposite direction where they are going to reduce fares, even though we are excluded from those initiatives, such as the 20% reduction in fares and the student or youth fare, which we have been excluded from as well in the short to medium term. We therefore have no option but to try to absorb it. It will impact on service delivery and service levels. As I said in my statement, there may have to be curtailment of services in the coming months to try to cover costs or keep them at a minimum and to try to survive this hiatus that has happened.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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I thank Mr. Kavanagh for that but on the fuel, if his total cost base is normally say 60 or whatever, how much of that 60 is fuel? Is it 10%? Is it 40%?

Mr. J.J. Kavanagh:

Fuel is about 20% to 25% of the overall cost of operation.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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That is as a proportion of the cost of running of a freight or a coach operation-----

Mr. J.J. Kavanagh:

Freight would be different.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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-----so it is a very significant component of the costs. Mr. Kavanagh is talking about a 50% increase in those costs, in that it has gone from €150 to €225.

Mr. J.J. Kavanagh:

Yes.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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Thus the cost that was 25% of the cost base is now-----

Mr. J.J. Kavanagh:

It is now 37%.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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The overall cost has gone up but it is a very significant part.

Mr. J.J. Kavanagh:

Yes.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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Most operators would not be making margins that can sustain that. That is what I was trying to get at.

Mr. J.J. Kavanagh:

In Ireland, we have one of the lowest fare structures in Europe. Therefore, we have very tight margins. It is all about volume. It is all about keeping your vehicles full. It is like the airlines. It is a very a tight-margin business. Therefore, any impact on costs like fuel - wages are another thing because we have a shortage of labour as well so therefore-----

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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And obviously Mr. Kavanagh is, if not the biggest operator, then one of the biggest operators.

Mr. J.J. Kavanagh:

Yes. We have not had a fare increase in about five or six years.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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Yes, but many operators smaller than Mr. Kavanagh would not have the economies of scale he might have either. Of the CTTC's membership, I think there is an average of six vehicles per operator but there are presumably loads of operators with one and two coaches that are more stretched.

Mr. J.J. Kavanagh:

Yes. They might not be in the scheduled service side but rather in the school side.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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They are also facing the same challenges.

Mr. J.J. Kavanagh:

They have a bigger problem. They have no margin because many of the contracts they entered into were made perhaps four years ago and they are still running at the same price.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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Has there been dialogue with the Department of Transport or any other Department, such as the Department of Education, about this idea of separating the fuel cost and saying that if fuel costs increase by 20%, more will be given and vice versa?

Mr. J.J. Kavanagh:

That has not been a major point of discussion up to now. The Coach Tourism and Transport Council of Ireland meets the National Transport Authority, NTA, monthly, and the authority understands the issue. It has been addressed where direct contracts apply or in respect of the rural links and so on, where an adjustment is being made. On the school side, there is no adjustment. In the case of private hire, obviously, operators adjust the price they charge under the contract or negotiations can be entered into. On the school side, it is particularly difficult.

Photo of Gerry HorkanGerry Horkan (Fianna Fail)
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Yes, the operators are locked in. I thank the Chairman and do not want him to end up in jail or in court. Many of our guests’ contributions have been very detailed and I acknowledge the effort that was put in. If there is additional time at the end, I would like to come back in, although I doubt there will be.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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I will not land the Chairman in jail either but I thank all our guests for their very fine contributions. As Senator Horkan alluded to, we should return to the various recommendations as a committee.

I thank Mr. Kavanagh, in particular, for attending. David O'Brien of Cork Coach Hire, a commercial operator, been strong in his advocacy. Will Mr. Kavanagh elaborate on his comments regarding the lack of alignment in State contracts and Government procurement, in particular regarding school transport contracts, the effect they are having on operators and the provision of school transport at the moment?

My next question is for Mr. Drennan, whom I thank for his contribution and for his sensible approach on the public airwaves, whether radio or television, and in other media. He is a fine spokesperson for the Irish Road Haulage Association and I have found him to be measured in his advocacy. He has calmed the situation, which has been very difficult for his organisation's members and his leadership is to be commended. Will he expand on the point about politicians acting as an interlocutor and on what he thinks we can or cannot do in that capacity regarding fuel costs and the future of the sector? All of us are concerned about the future of both the road haulage association and the coach and tour operators. I will not go into this in detail because a substantial report was published today showing that tourism figures have declined year on year for three years.

Finally, I thank Mr. Flynn for his very fine contribution and for the recommendations he made, and I thank Mr. Kenny also. We appreciate our guests' attendance and we understand their frustration and that of their organisations' members. We hope that, as Members of Parliament working on their behalf, we can intercede with and through the Government to make life better for their people.

Mr. Eugene Drennan:

As regards being an interlocutor, we have presented five or six schemes to the Ministers for Transport and Finance, Deputies Eamon Ryan and Donohoe, that take into account the greening of our industry and the embrace of it. We want to bring it forward to be a modern industry that uses fuel efficiently, but we have not had an indication from the Government about what would be acceptable. As I was listening to one of the presentations that was made earlier, I took exception to the suggestion we do not embrace modern technology. We do but, as we have pointed out - this is where the State can act as an interlocutor – hydrogenated vegetable oil, HVO, and biofuel are not available to us in sufficient quantities to keep the fleet going. As for hydrogen and gas, the ships and the channel tunnel will not take us on board. We need diesel to supply Ireland, full stop. We can have clean diesel or additive diesel and we can do our best with it and modernise our fleet to a Euro 6 standard. There is no higher standard, no matter the mode, than Euro 6. We are keen to embrace it and anxious to get there.

In the context of Fit for 55 in Europe and all the green agendas, we seem to be trying to move faster than anyone else and to reach the deadlines more quickly than anyone else, yet we have the furthest distance to go and are the island off the island. It is too competitive an agenda in the context of the costs to us. We need the Government to be an interlocutor with Europe to highlight Fit for 55 is only aspirational. There is no law about it yet. Other countries are giving rebates and other incentives. Romania cut its price to €1.40 just before the crisis started. We are cognisant of the fact the State must keep the price of fuel in or around $300 a barrel. That is the law. How it is administered up or down can be determined by the State. We need to bring home the essential user to the supply chain or it will all stop. The crisis here, with the price increases so severe, is moving so fast that when we met the Minister for Transport on a Thursday some weeks ago, by the time we were meeting the Minister for Finance on the Monday, the whole agenda had changed, given how much and how fast the price had increased over the weekend. It is now at such a crisis point that we must move fast. There was a stoppage in the co-operative in Nenagh today - I will not name it on the record - and the milkmen did not go out to collect the second round of milk. It was a stand-off, and that is spreading to other co-operatives. We need the Government to be an interlocutor in Europe for us.

There are three parts to this, one of which is our industry, which will take some of the strain. The second is our customers. There are public limited companies, PLCs, and co-operatives with very fat balance sheets that have not addressed the costs and have not come to the hauliers. Third, there is the State, which can help us following a spike or a spiral and dig us out to get over any of these issues. There is nothing to bring the customer to the table. Customers are up against a big wall; they are individuals and small companies. We heard the consumer affairs expert talk earlier about price gouging. If we cannot bring the customer to give us the increases, they are not addressing the facts. We need the State to indicate what is acceptable and give us the supports, as we have requested. We proposed five scenarios to the Minister for Transport and none of them was fully acceptable because they did not take out as much carbon. We took all the carbon we could-----

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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I apologise for interrupting. Was it just because of the carbon element that they were deemed not to be acceptable?

Mr. Eugene Drennan:

That was how it appeared at the meeting. We took out all the nitrous oxide, the sulphur oxides and the particle matter, cleaning up the environment very well. That is acceptable in every modern city of Europe but not here. Where do we go from there? Aside from that, there are additives coming in. That is fine if the additives are out - we are up for that - but adding the additives has a cost, and Mr. Jackman will go through the costs if the committee wishes. We can get support regarding the additives, such as AdBlue, but somewhere along the line, we need the three parts to work. We have to take the strain, the customer has to be brought to the table, and we need the supports and back-up to be there both during the process and afterwards, as has been the case in the past.

Mr. J.J. Kavanagh:

Up to now, contracts with Bus Éireann were standard contracts. Back in the day, there was an annual review, which went out when five-year contracts came in, about ten years ago. Nobody could see the price hikes coming to the extent that they have done and, therefore, there was no necessity for a fuel price variation clause. The Coach Tourism and Transport Council of Ireland holds quarterly meetings with the Department of Education. This matter has been raised at recent meetings and the Department is considering it. The precedent is there. The National Transport Authority has variation clauses in some its contracts. They were not in some of the rural link contracts but the NTA has accepted there is a necessity for them. If we cannot make money at what we are doing and if it is not commercially viable, we will not have resources to reinvest in new, more modern vehicles, low floor wheelchair-accessible vehicles and Euro 6-compliant vehicles. Euro 6 vehicles currently are the only type of vehicle that makes sense for rural Ireland.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The school contracts are fixed-price contracts, in layman's terms.

Mr. J.J. Kavanagh:

Yes. They are fixed, unfortunately, for five years, so they do not take into consideration what goes on over those five years.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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The other part of my question is whether there is a threat to the ongoing provision of school transport.

Mr. J.J. Kavanagh:

There certainly is, because those who entered into a school contract three years ago when fuel was €1.20 now cannot sustain that. Given the approximate value of the school contract, the profitability has been totally eroded. Everyone is working at a loss currently in school transport contracts.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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The association is looking for a variation given the inflation.

Mr. J.J. Kavanagh:

A variation must be brought into play as a matter of urgency and with immediate effect. It must also be done retrospectively to when the problem arose.

Photo of Jerry ButtimerJerry Buttimer (Fine Gael)
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I have another meeting at 4:30 p.m. and I apologise to the witnesses that I must leave shortly.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Apology accepted.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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I will not take long, although nobody ever believes that when anyone says it.

The sector is obviously under severe pressure given where the industry is at the moment. We have had the wobble and the worries around supply but now we are down to price. This is all coming down to price. A number of other stakeholders were before the committee earlier. The idea that came out from there is that the supply is relatively secure, even though there is a reorientation around where the fuel is coming from. There is plenty of it, but nobody can guarantee the price. We all know where the Government is on this and the big ask is that the European Commission would come back with a positive result that allows us to move on the VAT rate.

Mr. Drennan has asked for two things, specifically, the diesel rebate scheme and the acceptance of diesel as being a necessity, even in the short to medium term.

Will Mr. Kavanagh go into a bit more detail on how exactly this fuel variation clause would look? Perhaps Mr. Kavanagh would lay this out for us and about how much we would be talking about, were it to be retrospective.

Mr. Eugene Drennan:

The Deputy has got that right. We have an essential user rebate in place. It is very small and does not reflect anywhere near should be at. It was negotiated in 2008 and came in during 2010. It now needs to be aligned with what would give us a reasonable return for the periods of spikes. We are well aware that there are three parties to this, and that the customers has to take up their share but nobody could keep up with the spikes that are there now. With Ireland being the furthest distance from Europe, and the west and south coast being further again, we must have the supports that would enable us. In the round, there is too much hanging off the price of a litre of fuel. We have added too much on with carbon tax, the National Oils Reserves Agency, NORA, levy, additives and all of that. Ireland is uncompetitive on the rebound journey. We are out of sync with every other country. It pear-shapes our markets and it cuts our competitiveness. Ireland has just come through Brexit, which is still really upsetting the flow of our business and profit profitability for anybody doing the UK routes, plus the timeline that feeds in here. We need to recalibrate the essential user rebate for greening the industry and to have a reward for the country out of it, but also to keep us efficient. We put those proposals to the Government.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What specific proposal?

Mr. Eugene Drennan:

We need what we have proposed to be brought to fruition. It comes to approximately 25 cent per litre.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Rather than the 7 cent?

Mr. Eugene Drennan:

That is right, or perhaps 28 cent, depending on-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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So, it is roughly a trebling.

Mr. Eugene Drennan:

Or else we-----

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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Has Mr. Drennan put these proposals to the Government at this stage?

Mr. Eugene Drennan:

We put forward five proposals. It is done on a mathematical equation. If one changes the multiplier by 0.3 up along, by 0.9 one really gets to the rebate. At 0.6 it is in between, or whichever way it wants to add it. Alternatively, it could sell us fuel at the same rate as agricultural diesel to get through this, at €1.10. Alternatively, we take the cost up to whatever figure we get to and above that, the State would take all of it until this settles. There are three equations in the multiplier. We put all of the scenarios to the Ministers for Transport and Finance. I must acknowledge the Minister for Finance and the 15 cent rebate but that is within this fiscal period up to the next budget. It is not there for us after that. People mix us up with all the cars and the totality of fuel consumed and the carbon emissions. We are a separate sector and an essential supply chain sector, As an island, the one thing that the EU has never been told by us is the fact of our island status. The EU understands that Ireland is an island and they understand that we are far away from the markets. The EU also understands that we need supports, but they do not understand that-----

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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We are the last chain in the supply chain.

Mr. Eugene Drennan:

That is right. We also should have tolerance in the carbon count because we can only use diesel. This has never been brought home to the EU. The costs of all of this accrue, and they are accruing on to the litre of fuel.

The Deputy had a second part to his question.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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Mr. Drennan has gone into the specifics of the diesel rebate scheme. Perhaps there is some material the committee could get with regard to that, just to see exactly the algorithm that was put in front of the Government; we will pretend that we understand it.

Mr. Eugene Drennan:

We can give all of that to the Deputy.

Photo of Ruairi Ó MurchúRuairi Ó Murchú (Louth, Sinn Fein)
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Beyond that, there was the specifics of the reality of where the association is coming from with regard to diesel in the short to medium term. Mr. Drennan has stated that hauliers cannot use the alternatives.

Mr. Eugene Drennan:

If this is brought in right, we could have a permanent revolution going towards modern technology all of the time, because we will keep coming up to modern technology if we are sustainable and viable. The coach operators are in bad and dire straits on fixed contracts. We are on a 2% to 6% profit margin. The modernisation of the engine technologies for the greening has put €55,000 onto each vehicle for us to date, and it is going up by €15,000 next year.

Mr. J.J. Kavanagh:

The Deputy asked how the variation would work. The variation would work very simply. Take an average, for instance last year when the average price was running at about €1.20 per litre. On a monthly basis thereafter, with any differential in price there would be a variation and that would be reimbursed to the operator, in part or in whole I presume, because otherwise the contract would be unviable. It is a very simple mechanism that is already there. The provision is there with the NTA for Local Link, for example. They took 20% of the running costs of the contract price as the fuel costs. They then took 23% of that and awarded it to the operator.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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If they basically took the NTA's Local Link scheme in this regard and brought it into the bus sector, would the industry be happy with that?

Mr. J.J. Kavanagh:

That would work perfectly for the Government contract for school transport.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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There is a precedent there.

Mr. J.J. Kavanagh:

Yes, but unfortunately that will not work for tourism. We also need something for the coach tourism sector. As was said already, 2 million people travelled on our coaches in 2019. We cannot afford to price ourselves out of the market now. One of the ways we can do that is by reintroducing the 9% VAT rate, but unfortunately - and I do not know if the Deputy is aware - coach tourism and passenger transport is an exempt activity.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I will let the other representatives also bring that into the discussion.

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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I want to put a number of questions to Mr. Drennan. On the proposed revamped diesel rebate scheme that the association put to the Minister and the Department, could Mr. Drennan please take the committee through that and how it would work? Compared to other countries how far is Ireland behind? I am aware it is only 7.5 cent but it is a major impediment.

My next question is for Mr. Flynn of the Freight Transport Association of Ireland. Will Mr. Flynn explain the nature of his own business and who he is representing here today? I have had a lot of negative feedback from hauliers in particular that freight operators are not passing it on, that it is not fair play, that they are very rigid and that they are not giving fair play to the hauliers themselves. I ask Mr. Flynn to outline the background of his own organisation, where he is from and who he represents.

Mr. Eugene Drennan:

The rebates in different countries are pitched at different prices but at the end of the day, they all came back to the $300 per tonne. That is the sacrosanct line in the sand for the European Union. It is still up to the State here to interpret that. It could be flexed out even a little bit further. The Deputy asked how far is Ireland behind. It is approximately 19 cent at present Holland and Belgium, in the centre of Europe, have a very high rebate.

Italy, Spain and France all also have rebates. It is around their pump price, how they want to sell the price to the public and how they want to keep their essential supply line going. From where we are pitched, we would need a rebate of 26 to 28 cent per litre, or something in that bracket, to match them. It is achievable and we have put the proposal that we would wrap it in the green agenda, decarbonisation, modernisation of the fleet and all of that in a short timeline and keep the State or us from being censured. We have made entreaties to different people to alleviate the carbon emissions at the port, which is an area I went into before and so will not go into again. That is how it will work. It is a recognised mathematical equation that we worked out with the Department some years ago. The system works and is accredited by Revenue. You have to have a tax-free certificate to get on it. It has to be for licensed haulage and you have to submit your details every three months to get it back. If you fall outside the parameters of the mathematics, they are on to you and you will have an inspection quickly. The template is there, it works well and we can put further supplements into that and have safeguards for the State.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Only legitimate hauliers can claim it.

Mr. Eugene Drennan:

It is for the licensed hauliers sectoral supply chain. It is the international and national licensed hauliers sector.

Mr. Aidan Flynn:

I will give a bit of background on the Freight Transport Association of Ireland, FTA Ireland. We are a membership trade association for the freight distribution and passenger services sector. We have members in the own-account passenger services, from the public and private sectors, and haulage operators from the international and national haulage sectors. We also provide a suite of training and consultancy services and auditing services. We have safety initiatives called TruckSafe, VanSafe and now PassengerSafe, where we push to develop a culture of compliance and professionalism throughout the supply chain and within passenger service provision.

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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Where is the parent company based?

Mr. Aidan Flynn:

FTA Ireland is a registered company in Ireland.

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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Is it a subsidiary?

Mr. Aidan Flynn:

We were established through a link with FTA in the UK. They are called Logistics UK now. Our board is made up of a couple of members of Logistics UK and members from BOC gases, a representative from the ESB, Bus Éireann-----

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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Is it British-based?

Mr. Aidan Flynn:

No, it is Irish-based. We are an Irish company. Members can look us up in the Companies Registration Office, CRO. We have been established here for 11 years. I have been working with FTAI for ten years. We represent businesses in Ireland and work proactively on compliance issues and raising professionalism standards and have good proactive engagement with key stakeholders. Our submission states that collaboration with all stakeholders is key to our agenda in terms of delivering for both the haulage and the own-account and passenger services sectors.

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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With regard to passing on some break to hauliers from the freight industry-----

Mr. Aidan Flynn:

I am not sure if the Deputy read or has a copy of my opening statement but we called for solidarity within the supply chain. That is crucial. We do not want to hear this negative feedback about engagement. We are in a time of crisis. The fuel crisis is being driven by Covid-19 pandemic issues and consequent increased energy costs, as well as the unfortunate issues we now face concerning Ukraine and Russia. We seek to develop solidarity within the supply chain, covering what Mr. Kavanagh mentioned in terms of developing fuel surcharge arrangements and being able to have open and honest discussions within the supply chain and passenger service operations around fuel surcharges. We made a recommendation that the CSO could become more proactive as ade facto trusted reference for industry in relation to transparent fuel pricing, which would support these fuel charges.

We are getting calls all the time from bus and haulage operators not understanding in the first instance that they can get an excise rebate. We want to encourage more awareness of what is available to them. Only one third of those who qualify for the 7.5 cent rebate get it. Revenue, the Department of Finance and the Government need to ask why two thirds of those essential workers do not get this rebate programme. We need to establish the reasons for that and to put proactive measures in place to support small to medium-sized businesses so they can get it.

The 15 cent excise duty should be introduced for a lot longer to provide more stability and support in the industry for business planning and strategic planning. You add that on to the 7.5 cent. We are not the worst or the best in Europe in terms of supports but much more can be done and needs to be done quickly to support industry.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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I welcome the witnesses. I will start with the IRHA. I thank Mr. Drennan for being here and commend him. He has provided helpful information to members of the committee who have sought guidance and is doing an excellent job in his role. What confidence does Mr. Drennan have in fuel security over the next six months? How close did we get a couple of weeks ago, from a supply point of view, to hauliers not being able to get fuel? We had pricing issues and it is happening in fertiliser and other commodities as well as fuel.

Mr. Eugene Drennan:

Supply of fuel, petrol and kerosene for home heating is okay. Diesel is still a bit quirky. There was to be a blip of four to six weeks originally in fuel supply and it seems to have extended but we are just about getting by. Regarding the rebate of 15 cent that came from the Minister for Finance recently, for bulk purchasers it would have been a help to competitiveness if the seller of the fuel, whether retailer or whatever wholesaler one gets it from, in bulk in particular but also in cards, mentioned the actual price on the invoice and the discount was then shown. Now it is mixed up together and we may see some little bit of-----

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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Massaging.

Mr. Eugene Drennan:

Yes, not to malign anybody. On the supply chain, I would like to see the Minister for Foreign Affairs or whoever has input in the EU to get Saudi Arabia to turn on diesel more. It is the next biggest supplier of diesel. It has not filtered through. I believe there are ships at sea but they have not arrived. In this time of crisis, if the Arab states or OPEC were encouraged on the production line, it would ease prices. It would ease the price if we had surety of getting the product, it was readily available and supply was sufficient.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I thought some of it came in.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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I have very limited time. Would it be possible to continue with my slot?

Mr. Eugene Drennan:

I will come back to that.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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Coming back to fuel security, what issues did the hauliers come across? Can Mr. Drennan give us an insight? Many people in the public domain are not aware of what happened

Mr. Eugene Drennan:

The issue is that though there are many names out there, there are only five or six full importers of oil. The others are subagents of them, under another name, on a quota or whatever way they do business. Given that restriction, it is like anything on an island, as we have seen many times before. We are open to people knowing exactly what price can be got. I think consumer affairs are watching that well but we are open to it.

On the supply line, we saw a little bit of named suppliers of fuel keeping their forecourt going ahead of supplying hauliers on a tight margin on a few occasions last week and the week before. They did not get their full supply, were being watched on their quota and were barely getting by with enough. That eased this week but I brought it to NORA and Kevin McPartlan will be aware of it from me as well. We worked on it together but it went tight and was a little bit impaired at the end of the week before last and-----

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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We have to call a spade a spade because-----

Mr. Eugene Drennan:

I am a good man for that.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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I get in trouble fairly regularly for doing it. A concern is that supply at the moment is being outstripped by demand.

I envisage us reaching a situation where, despite the rebate that has been put in place, we quite easily hit the price points that were reached. What confidence do our guests have in the current arrangement that has been reached through their work with the Department of Finance on that issue?

Mr. Eugene Drennan:

Is the Deputy referring to the supply chain for fuel?

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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I am referring to the actual price being kept at a relatively affordable level for hauliers.

Mr. Eugene Drennan:

That is not within our discussions with the Department of Finance because it really cannot do that. It is such a moveable feast that the Department is not prepared to cap it or to-----

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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Is a cap needed?

Mr. Eugene Drennan:

It would be a great help. It would sort everything out if there was a level we had to pay and, above that, the State took care of the rest. That would certainly sort out the-----

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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I suppose the departmental view is that such a cap would be highly interventionist and would cause supply issues into the country. That is what has been said to many Oireachtas Members. Does Mr. Drennan reject that viewpoint?

Mr. Eugene Drennan:

The supply issue is still okay; I am just talking about price capping. As regards supply, we got over a bit of wobble two or three weeks ago relating to the supply of Russian oil and whether we should accept it, having paid for it. That debate went in sort of a political direction, with certain people taking moral high ground and various people coming at it with different aspirations. One thing that is for sure - I am no doubt about calling a spade a spade on this - is that we should accept that oil. We have paid for it and we have a contract. It is coming in through the flow line. Crippling Ireland does not solve the problem of the other country that is crippled. We have to be able to function during and after this crisis. The last time this kind of crisis was experienced here was during the First World War, when there were often fuel shortages. We should keep the flow going because we will hit Russia a lot harder by getting its oil as cheaply as possible than we would by shutting off the supply. Shutting off acceptance of the supply would trigger another significant scenario with Russia in the context of gas and we would be getting into a bad circle there. We should definitely keep the oil coming and we should seek more production by the OPEC countries or Saudi Arabia because they are the big producers of diesel.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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I thank Mr. Drennan. My time is limited.

Mr. Eugene Drennan:

I thank the Deputy for his questions and for his help in the past.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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That is no problem. I will continue to help.

My apologies to our guests from the CTTC for the lack of time. Obviously, hauliers have been give a degree of support. Some would argue it is not sufficient. I may be of that view. As regards the coach tourism industry, where is it at with the Departments of Finance and Transport in terms of negotiations? Where is the CTTC getting with them? Have the Departments opened the door to it? Is any similar progress being made in that regard?

Mr. J.J. Kavanagh:

There is support in respect of the scheduled services that are in contract with the NTA. There is a variation clause in the contract. With regard to schools, there is no variation contract. That is with the Department of Education and Bus Éireann.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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That probably accounts for the majority of the business the-----

Mr. J.J. Kavanagh:

It accounts for a significant amount of business. On the coach tourism and private hire sides, there is no support.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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Has Mr. Kavanagh highlighted that with the Minister? What feedback is he getting? Is progress being made?

Mr. J.J. Kavanagh:

We have made submissions in respect of VAT. As I outlined in my opening statement, it was only submitted in the past couple of weeks because, obviously, the situation has worsened. It will become a bigger problem during summer when coach tourism is at its height.

As regards the fuel rebate, up to 2010, scheduled services were deemed an essential and important part of the national infrastructure and we got a rebate on fuel of 0.34533 cent per litre. That figure is ingrained on my brain; I have never forgotten it. We used to get it monthly. We got a rebate on fuel every month for scheduled services because the State recognised them as essential. That was taken away because of the financial crash back then. The 7 cent that was secured subsequently is minuscule. In fairness, the paperwork involved in doing it now is incredible. I used to do it for my business and it took two hours. It now takes two people in the office two days to prepare the paperwork to receive 7 cent, 5 cent, 2 cent or 1 cent per litre, depending on the price of fuel.

Photo of James O'ConnorJames O'Connor (Cork East, Fianna Fail)
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That is shocking.

Mr. J.J. Kavanagh:

There was a mechanism that worked successfully. Cash flow was helped significantly with those rebates-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Mr. Kavanagh is not reinventing the wheel.

Mr. J.J. Kavanagh:

I am not. It is there already. It was there for tourism as well at that time. Any operators providing school transport were getting it.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I ask Mr. Kavanagh to send the committee a follow-up note on that.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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It is difficult to do full service to our guests in the time available to us. There is more in their written submissions than they have put on the record. We should publish those submissions. If there is additional information, I ask that it be sent to the committee. We need to weigh in behind the requests that have been made. I ask that the proposals Mr. Drennan has made to the Ministers be provided to the committee so that we can weigh in behind them.

Mr. Eugene Drennan:

We have brought in documentation relating to the central part of our meeting with the Minister, Deputy Eamon Ryan. It indicates the flow and the conversation. We will leave it with the secretariat for committee members to pick up if they so wish.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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I thank Mr. Drennan. In his opening statement, Mr. Flynn identified several people who are excluded from the €100 grant. I ask him to give us those details. Obviously, school bus operators and private bus operators are excluded, as are several HGV operators, as far as I understand it. Why is that the case? Does Mr. Flynn support that being expanded?

On the issue of school bus transport specifically, I have raised it with the Minister for Education, Deputy Foley, because, of course, it is her Department from which the money comes. My colleagues raised it with her earlier today on the floor of the Dáil. There has been no indication that there will be any movement from that Department in terms of support for Mr. Kavanagh and his colleagues. Have they had engagements? How urgent is their need for support?

Mr. Aidan Flynn:

To clarify, the vast majority of our fuel supply comes from the UK, Norway and the US. We are not very reliant on Russian fuel.

As I outlined in my opening statement, there are approximately 40,000 heavy goods vehicles over 3.5 tonnes. The haulage sector accounts for more than half of that but there are nearly 20,000 commercial heavy goods vehicles that are operated within the own-account sector, all of which have the same operational costs. They are excluded from the rebate programme in general. They cannot get the 7.5 cent. They are also excluded from the €100 emergency grant. We saw during the Covid pandemic how reliant we are on all sectors of the heavy goods vehicle market, including the own-account sector, which worked hand in hand with the haulage sector in terms of delivering an efficient logistics sector and deserves massive credit for the work.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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Are plant contractors also excluded?

Mr. Aidan Flynn:

They are excluded, as are PSV coach and bus operators. Coach and bus operators can qualify for the diesel rebate programme but were excluded from the €100 emergency grant. We cannot see the reason they were excluded in the first instance. That decision definitely needs to be reviewed as a matter of urgency.

Photo of Darren O'RourkeDarren O'Rourke (Meath East, Sinn Fein)
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I asked about the engagement with the Department of Education and the imminent crisis in the school transport sector.

Mr. J.J. Kavanagh:

There is quarterly engagement. The most recent meeting was held last month. I was not at the meeting but the issue of the fuel crisis was raised at it. The Department agreed to review it. The example of how the NTA is dealing with the fuel variation difficulty and reimbursing people was given. It is imperative that something is done for the school transport sector as a matter of urgency because many of the contracts in that regard are up for renewal this year. As such, it has been five years or maybe six years in some instances because of the pandemic, since prices were set. It is totally unsustainable, therefore, and unless something is done about it, people may not be in a position to provide a service in May or June, which is a critical time for students doing exams. It is not that they do not want to provide the service; it is that financially they will not be able to afford to do so. It is an unfortunate situation but something has to be done for the sector as a matter of urgency.

Mr. Brendan Crowley:

It must be remembered that while Mr. Kavanagh is referring to school contracts that were awarded by the Department of Education, there is a significant cohort of services that are not covered under that scheme. There are many operators that will not benefit from anything that is done directly as a result of that.

If we were to go back to the initial part, with a fuel rebate like the previous one, those other companies would also benefit. Deputy O'Rourke has raised this question previously. Many private routes across the country are not operating under variation contracts.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Before I call others to contribute, I wish to ask Mr. Drennan something. Under the current scheme, once the price goes above €1.27, the rebate reaches a maximum of 7.5 cent when the price reaches €1.43. Am I correct in that?

Mr. Eugene Drennan:

Inclusive of VAT. Exclusive of VAT, it would be €1. It kicks in at €1.07. Our proposed rebate is 7.7 cent.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What was the basis for the €1.27 and the €1.43?

Mr. Eugene Drennan:

Initially, it was to give some relief during the spike. We were badly caught. The matter was with the then Minister for Finance, Michael Noonan, at the time. In this way, it was acceptable to the Department of Finance. There were reservations as to the total cost.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I am not interested in that. I understand it all. I am more interested in the basis for setting those rates. We are looking at a greatly increased price now. The rates of €1.27 and €1.43 were not picked out of the air.

Mr. Eugene Drennan:

No. The basis was how the hardship tax relief was being spent on fuel and how we had gone out of kilter-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Mr. Drennan is missing my point. If there was a logic around-----

Mr. Eugene Drennan:

The price of fuel.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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If this is the way the IRHA is approaching the matter, has it considered whether, if the same basis were to be used now, it could be the basis for a new scheme?

Mr. Eugene Drennan:

Correct.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Mr. Drennan might provide-----

Mr. Eugene Drennan:

We have extended it out by the existing multiplier or different multipliers.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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If the IRHA wants us to, we can follow up on this matter. Is that its main request at the moment?

Mr. Eugene Drennan:

Yes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Then it might revert to us on it. There is no point in us pushing an abstract. This is something that is real.

Are the IRHA's members making money at the moment?

Mr. Eugene Drennan:

Absolutely not.

(Interruptions).

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I am aware that I am asking the obvious question. Mr. Ryan will be aware, given that we have discussed it. He is one of our local men in Limerick. What is the minimum that operators would have to get under a rebate scheme to put them in a position where they were financially viable again?

Mr. Eugene Drennan:

The rebate scheme as proposed by us takes us to Europe's legal level, of which we have to be cognisant. If we get that maximum, the rest of the strain must be taken by the customer. We need the committee's support because the customers are refusing to come to the table. Some customers have said that they cannot withstand anything but those with the wealthiest balance sheets in the country will not address their hauliers.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Then use us as a committee to assist in that regard.

Turning to Mr. Kavanagh and the matter of coach operators, my understanding is that the CTTC wants to use the rural bus link scheme for school transport and to reintroduce a previous rebate scheme for a certain period. Are those the two requests?

Mr. J.J. Kavanagh:

Yes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Will the CTTC revert to us with more details so that we can follow up on it?

Mr. J.J. Kavanagh:

Yes. However, tourism-----

Mr. Eugene Drennan:

This situation is so fluid that, if it goes wrong-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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We will follow up on it. We have received the requests, but for us to do something of a constructive nature now, we need the witnesses to follow up with us.

Mr. J.J. Kavanagh:

No matter what scheme we introduce, we have to consider what the price is.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Every scheme must be flexible on price. That is the point I am trying to make about the €1.27. I am interested in the basis of the scheme. There must be a basis. Otherwise, this would be too abstract. There can be a scheme that swings in and out.

Mr. Eugene Drennan:

Our basis is €1 net and removing the cap at the other end, letting it flow with the price. That is our request and our proposal.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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We need a bit more detail.

Mr. Eugene Drennan:

Okay.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I will move on to the non-members. I call Deputy Verona Murphy. She has five minutes. We have to be out of here soon.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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I thank all of the witnesses for attending. I will make a point to Mr. Flynn. He stated that it was the UK and Norway we were reliant on for fuel, but one assumes that the UK is not drilling for oil. I am concerned that, at some point, we will lose the majority of our gas supplies. At that stage, a barrel of oil will increase to well in excess of $200 and all of this talk will be moot. It could happen tomorrow, it could happen next month or it might not happen at all but we can plan for that eventuality.

We cannot deal with the price of the commodity but we can deal with taxes. The witnesses are coming from sectors where the carbon tax is taxing them into oblivion. They have no alternatives. They are primarily diesel, so that is the end of the story. Mr. Flynn mentioned compressed natural gas, CNG. It does not matter whether an operator is using a gas or diesel engine - the standard is what counts. At Euro 6, that is the cleanest standard there is. The witnesses' members should be exempted from carbon tax. On 1 May, their carbon tax will increase. My proposal to the Taoiseach last week was that all taxes and excises be removed as a temporary emergency measure because there is too much complication. We do not have time to deal with the fuel rebate.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Does the Deputy have a question?

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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Do the witnesses agree that the carbon tax is taxing industry into oblivion? It has primarily been introduced by the Irish Government. It does not happen on mainland countries.

Our fuel rebate is 7.5 cent. What is it on the Continent?

Mr. Eugene Drennan:

It can be as high as 22 cent or 23 cent.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Will the Deputy put questions, please?

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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I have five minutes.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I know, but we are caught for time.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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I will ask questions. Do not worry about that. Mr. Drennan should go ahead.

Mr. Eugene Drennan:

It is 22 cent or 23 cent on the Continent. As to the Deputy's comments on the carbon tax, cars are being mixed in with the essential use of haulage. We are the main users, as are coach operators. Even if we get a decent rebate to keep us competitive, we will still be a significant contributor to the State in terms of fuel taxation. We are being crippled. This is where the situation does not match up. It is nearly taxation on taxation.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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Ultimately, hauliers are in a competitive sector, so the fuel rebate going out to everyone does not make much sense. Nor does it happen in other countries.

Mr. Eugene Drennan:

No.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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They are in the licensed road haulage sector. There are also licensed bus operators.

In order to protect the consumer from price increases, the fuel rebate needs to increase greatly, which is the request being made today, and bus operators should be included in it, particularly those in the school transport sector. They have the complication of having to deal with the Department of Education and the NTA. How is the engagement on this proposal going? Bus operators are already losing money. If the carbon tax increases in May, will we face a situation where we may not have buses to get children to their leaving certificate exams? How will we transport the anticipated 200,000 Ukrainian refugees if we do not have bus operators because they have gone out of business? Will that become a problem?

Mr. J.J. Kavanagh:

It will definitely be a problem if some mechanism is not put in place quickly to alleviate-----

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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How quickly? Does Mr. Kavanagh mean weeks?

Mr. J.J. Kavanagh:

I would say immediately. It will be within weeks.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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I am aware of a number of truck and bus operators that already have gone under. They have parked up and are selling their vehicles.

Mr. J.J. Kavanagh:

A large number of people in our sector have had to park their debts.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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Have operators been approached about how the anticipated refugees might be transported? There are 10,000 refugees currently. I do not mean to conflate these matters, but there is an expectation of 200,000. Does Mr. Kavanagh believe bus operators will be playing an essential role in that regard?

Mr. J.J. Kavanagh:

Of course we will, if we are still around. According to our survey, 90% of our operators have experienced a large increase in fuel costs and 95% say that they might not be around in June. Many people have parked their debts on their investments. Now, those have to come back into play, so they will not have the resources.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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At the worst possible time.

I have a question. It is probably for Mr. Jackman. Regarding the low-hanging fruit that the IRHA has presented to the Government, is it not a fact that every time a truck stops at the Dublin Port tunnel, be it going inwards or outwards, it expends a litre of fuel and that €40,000 is being spent by hauliers every day unnecessarily, which the Government could curb in the morning?

It is €40,000 a day.

Mr. Paul Jackman:

In our ten-year transport submission there is a list of low-hanging fruit one of which is the one mentioned by the Deputy there. There are 11 tolls in Ireland. Only one is express, on the M50. The best, or worst, example is the port tunnel, through which 7,000 to 9,000 vehicles go every day. Each is forced to stop. International studies show that 1.5 l of fuel is wasted there. It just goes on. They reduced 42 tonnes on 5 axles back to 40 tonnes and the consequence of that is an additional 6 million km being undertaken to collect our milk. The industry is being hammered and there is not enough engagement. On CNG or any other alternative fuels, there is an ideological barrier with supporting diesel because of the make-up of the Government and our targets. However, if you look at the EU, last year 96% of all HGVs sold in the EU were diesel. That tells you everything that you need to know. That is in a market where they have other options. In Ireland we do not and 98% of the goods-----

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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Is it not fair to say that the carbon tax is counterproductive when you consider that we could alleviate 30,000 l of fuel being expended into the atmosphere from one toll yet we are having to pay carbon tax to pay for the benefit and the effects of that? It is an outrageous proposition.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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That is something that we can follow up on.

Mr. Paul Jackman:

While the carbon tax does not apply to the biofuel and HVO, which will soon be 13% of the component of diesel, the excise does. Excise on carbon or mineral oil tax, MOT, is what EU law references. As Mr. Drennan said earlier, we question the Government's inability to remove that because if you look at the EU energy directive it is based on, there is no reference to biofuel or HVO. In this jurisdiction the excise tax is being applied to the biofuel and HVO component.

Mr. Eugene Drennan:

We were led to believe when the carbon tax was introduced that it would be ring-fenced to incentivise any carbon emission reduction. The price of AdBlue and Euro 6 vehicles-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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We have to be out of here in five minutes. I have to be fair to everyone. I have been very fair to the non-members of the committee, so they should not-----

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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The consumer will thank the Chair for this.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Put it this way, I have one more contributor yet to come in. I want to be very inclusive.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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The contributor is in line with me, I have no doubt. I want to say this-----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I expect that he has his own views and I would like him to be able to express his own views. Deputy Verona Murphy may have views. We all have different views here. The Deputy's views are well versed and we fully understand them. This is a very important issue. I wish that we could give it a lot more time.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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I just want to emphasise the level of urgency these people bring to the table. As a member of Government, I would like the Chair to bring that back.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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With due respect, over the St. Patrick's weekend, I worked to get everyone in here today. We all know how urgent this is.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I ask the witnesses to give me some quick-fire answers back. Mr. Kenny spoke about hydrogen. When is it coming?

Mr. Joe Kenny:

That is a very good question. I have no idea, to be honest. We propose that these things need to be looked at on a whole-of-industry basis.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Let us call a spade a spade. A bus with hydrogen costs €800,000. I went through the -----

Mr. Joe Kenny:

It is further away.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It is €22 per kilogram. BOC does not even have the machinery. It can go as far as 17 kg; it needs to go to 28 kg. I think that we are dreaming dreams if we are on about hydrogen.

Mr. Joe Kenny:

The point we make is that we need a transition plan to get us to there.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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It is about 20 years away.

Mr. Joe Kenny:

What we are saying is that some people in industry have said that they would prefer to get there. But we will not get there tomorrow.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Let us deal with the crisis we are in at the moment. That is 20 years away.

Mr. Joe Kenny:

Yes.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Bus men do not get VAT back, is that correct?

Mr. J.J. Kavanagh:

Yes.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I am a contractor. Most lorry men are registered for VAT. Would making VAT reclaimable for bus men be a solution?

Mr. J.J. Kavanagh:

Of course it is. It would be massive. We have looked for it for years. We have been told it cannot be done because of EU law. We are in an emergency situation now.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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The Chairman might take note of that.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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What VAT rate do the bus men pay on their sales?

Mr. J.J. Kavanagh:

We are exempt.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I take the point.

Mr. J.J. Kavanagh:

Across the pond, I know they are no longer part of the EU, they are zero-rated for all their sales.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I accept that. It was not a judgment call but a point of clarification.

Mr. J.J. Kavanagh:

For every litre of fuel we put in, we pay 23% in VAT. We cannot recover it. That is massive. It is also the case in every other input too.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Does Mr. Drennan know what percentage of trucks now have switched to Euro 6 standard engines?

Mr. Eugene Drennan:

It is 40%, or 38%.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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How long would it take to get more of them?

Mr. Eugene Drennan:

If we get decent incentives, we will be there by the 2030 deadline.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Right. I have two questions for the hauliers and the bus men. Some companies did deals for a surcharge, as we called it in building years ago. There was something called a surcharge which clicked in over a certain level. Some companies have done it at €1.30 at the moment. Would it not be a simpler solution that we would have a system where there is a level playing field across the board where it clicks in automatically for bus men, lorry men or whoever rather than, say, the NTA giving a few quid extra for the Local Link or something different everywhere else?

Mr. Eugene Drennan:

That would be ideal. That would be great. But there would have to be a legal entity behind it.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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There are 42,000 lorries on the road and 20,000 of those cannot get the rebate or €100 a week. If I own a mill and I bring the meal to a farmer, I cannot get it because I do not need a haulage licence because I am hauling my own goods. If I own a quarry and am bringing it down, I cannot get it. They should be included in it.

Is Mr. Flynn from an English company or what is the set-up?

Mr. Aidan Flynn:

No, we are not an English company. I think the name gives it away: Freight Transport Association of Ireland. We are a company limited by guarantee, CLG, registered in Ireland. We have been established here for 11 years.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Is it training it does?

Mr. Aidan Flynn:

We have nearly 300 members that represent over 10,000 commercial vehicles in the State, including coach and bus operators, hauliers and the own-account sector.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Will Mr. Flynn run through it briefly. Does it do training for the State or what?

Mr. Aidan Flynn:

No, we do training for our industry, for our members.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Does it do State contracts or what?

Mr. Aidan Flynn:

No.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Does it tender for State contracts?

Mr. Aidan Flynn:

No. We provide vehicle inspection services, so we provide independent roadworthiness inspections of buses. We do tachograph analysis -----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Hold on one second. Does it do haulage of its own?

Mr. Aidan Flynn:

No, we have no trucks. We do not do any-----

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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It tendered for the tachograph contract.

Mr. Aidan Flynn:

Yes, of course.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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It does.

Mr. Aidan Flynn:

We are in the business of providing tachograph contracts.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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What contracts?

Mr. Aidan Flynn:

We have various different contracts.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Mr. Drennan might come in on this. I saw a big four-page spread on a lorry company in the northern part of the country that moved to gas. He will probably know what I am on about. What would be the effect, that is, what would it cost them to move to gas? On top of that, what about the lack of services around the country? There is only one game in town for lorries for the next ten or 15 years. We can dream the dream but diesel is the only game in town.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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That is the final question.

Mr. Eugene Drennan:

Their fuel costs are 30% dearer now.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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I have ten seconds left.

Mr. Eugene Drennan:

There is a line of trucks in England that are being brought in by a dealer here to scrap them on gas because the component parts are more valuable and no one can use them in the UK because they have gone too dear. The infrastructure to refuel it is not there. Its volatility is not accepted on the ships or boats.

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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So the people who went down the gas road are basically gone.

Mr. Eugene Drennan:

They are in big trouble. Some of them may not be gone. They might have only a portion of gas and maybe looking for carbon tickets or whatever, but it is no good to them. Even a journey from here to Cork, the truck would be -----

Photo of Michael FitzmauriceMichael Fitzmaurice (Roscommon-Galway, Independent)
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Does Eamon Ryan understand this when the Irish Road Haulage Association meets him, that is, there is only one game in town at the moment and it is called diesel?

Mr. Eugene Drennan:

We have certainly enforced the point to him strongly and often enough. The latter part of the Deputy's question I cannot answer.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I think Deputy Fitzmaurice has made his point. A quick question on the coaches. Are the coach operators making money at the moment on, say, school transport? Yes or no?

Mr. J.J. Kavanagh:

No.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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Okay. That is all I want to know. With that -----

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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Are the coach companies losing money on the school transport contracts? Are they losing it or making it?

(Interruptions).

Mr. Brendan Crowley:

There is a clause in the school contracts that if an operator gives up the contract, that operator cannot reapply for it if it goes to tender again. Therefore there are people caught in a bind where they are running at a loss -----

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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It is very simple. The devil is in the detail, right?

Mr. William Martin:

If you give up your contract, the State company you are working for can find an alternative at whatever price and you have to pay the difference.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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On that dramatic note, we need information from the hauliers and the coaches on the process. I thank the clerk for his forbearance. We probably all will do time because we have been here so long.

Photo of Verona MurphyVerona Murphy (Wexford, Independent)
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I want to wish everyone well. Their future is in our hands.

Photo of Kieran O'DonnellKieran O'Donnell (Limerick City, Fine Gael)
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I thank everybody for attending. We will follow up on this. We will have further engagements on it. I have concerns about security of supply, but that is a separate issue.

The joint committee adjourned at 5.10 p.m. until 1.15 p.m. on Wednesday, 30 March 2022.