John Gormley (Dublin South East, Green Party)
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Question 130: To ask the Minister for Finance if his Department has commissioned or carried out studies on the impact of peak oil on the economy here; the way in which this impact might be averted or reduced; and if he will make a statement on the matter. [38909/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I assume that the Deputy's question relates to the impact of peak oil prices on the economy. For the purposes of economic forecasting, my Department uses oil price assumptions prepared by the European Commission. As outlined in the stability programme update published on budget day, the assumptions underpinning the economic forecasts are that oil prices — Brent crude — will average $55 per barrel in 2005 and $61.4 per barrel in 2006.

My Department monitors trends in oil prices on an ongoing basis. In terms of the economic impact of oil prices, economic model simulations suggest that each sustained $10 per barrel increase in the price of oil reduces growth by between one quarter and one half percentage points in a full year in Ireland. However, it is important to bear in mind that these model results are based on historical averages. In addition, the results generally relate to the effect of oil price increases emanating from supply side shocks, whereas the recent increase in prices is generally regarded as reflecting stronger international demand.

As the Deputy will be aware, I announced a number of measures in budget 2006 to support the provision of alternative sources of energy. In particular, I have agreed with my colleague, the Minister for Communications, Marine and Natural Resources that Ireland should set an initial target of 2% of the fuel market to consist of biofuels by 2008 and that this should be achieved by targeted excise relief measures. Accordingly, I introduced a new expanded excise relief scheme for biofuels in the budget. The level of excise relief will be €20 million in 2006, €35 million in 2007 and €50 million in each of the following three years. This relief, when fully operational, is expected to support the use and production in Ireland of some 163 million litres of biofuels per year. This is some 20 times the current level of biofuels attracting excise relief. The environment will benefit in terms of a reduction in CO2 emissions from the initiative. Security of supply of fuels will be enhanced and jobs and outlets for agriculture production created. It is further estimated that it could ultimately give rise to hundreds of new full-time jobs in Ireland.