Micheál Martin (Cork South Central, Fianna Fail)

I recognise that escalating oil prices affect the cost structure of all sectors of the economy, including household budgets. At approximately $73 a barrel, the price of oil on international markets is now at historically high nominal levels. No oil user, whether industrial, commercial or personal, is immune from the impact of higher prices. Neither do we have any influence over international factors which influence world oil prices. We are all price takers and this includes our competitors.

However, the economy has proved resilient to higher oil prices. Despite escalating oil prices over the past two years, we saw gross national product grow by 5.4% in 2005. A further growth of 5% is forecast for 2006 with continued expansion of many sectors, including those which are energy intensive such as pharmaceuticals, food and drink and construction. Despite elevated oil prices over recent years, there is no indication that high prices have had a marked impact on economic growth or employment.

Sustainable Energy Ireland has a number of programmes and initiatives available for industry aimed at reducing energy intensity, improving energy efficiency and more effective approaches to managing energy costs. The development agencies under my Department monitor the issue of energy costs and the impact of these on their clients. The principal effects of rising oil prices will be through indirect or knock-on effects. Our focus therefore must be on the long-term competitive implications of higher oil costs.

We cannot either avoid or put off adjusting to higher oil costs. Trying to micro-manage potential pressures on different sectors is not sustainable and will not properly address the needs of the entire economy in the best interests of our society. In this connection, EU Finance Ministers agreed earlier this month that distortionary fiscal and other policy interventions which prevent the necessary price adjustments should be avoided. Our response is most usefully advanced by using policy instruments we already have. For example, in the partnership discussions and elsewhere, we must agree and implement economy-wide adaptations. These must include flexibility and wage restraint as key components in managing our economy.

In the context of energy policy, my colleague, the Minister for Communications, Marine and Natural Resources, who has primary responsibility in this area, is preparing a national energy policy paper which will address key policy options for energy management. This will set a policy agenda for energy over the medium to longer term. It will set out policy on a range of issues affecting energy, such as market issues, energy efficiency, alternative energy and research with sustainable energy as a key overriding theme. Sustaining and strengthening the competitiveness of our economy is a front line concern and a priority for my Department and the Government. Our international competitiveness ranking has improved, and I wish to ensure we build on recent gains as a basis for sustainable growth into the future.

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