Hardly a day goes by without another energy company planning massive price increases, usually in the double-digit percentage range. Supply problems, exacerbated by Russia’s invasion of Ukraine, are given as a reason that is understandable at first glance.
On the other hand, the Irish – many of whom fear their winter fuel bills – will also be alarmed by news of strong profit growth from these companies.
Already in the first quarter of this year, ESB made record profits and at the same time paid a high dividend to the state treasury. This week we reported that Bórd Gáis’ earnings rose 74% in the first half of the year. At the same time, we learn that the profits of the largest European oil companies Shell and TotalEnergies are beating all records.
This profit-boosting trend has prompted many opposition politicians to call for energy price caps imposed elsewhere. There were also serious government considerations about an unexpected tax on energy companies.
The left-wing opponents of the French minority government narrowly lost a vote this week that would have paved the way for a windfall tax on energy companies. The Paris government has already given big fuel tax rebates, making petrol and diesel significantly cheaper than in Ireland.
The French government approved 20 billion euros in inflation relief measures in the last 10 days. These include fuel subsidies, salary increases for state employees and the abolition of television licenses, which broadcasters instead finance through a VAT levy.
French Finance Minister Bruno Le Maire has publicly urged energy companies to voluntarily cut prices rather than risk a future windfall tax. In Britain, opinion is divided on the issue, and the confusion is compounded by a noisy and hard-fought campaign for leadership of the Conservative Party.
Frontrunner Liz Truss has ruled out any question of an energy windfall tax. She said such a move would send “the wrong message” to the world, adding that the government should encourage Shell and other companies to invest in the UK.
Her rival Rishi Sunak unveiled plans for a windfall tax a few weeks ago when he was chancellor. Mr Sunak said energy companies investing in UK oil and gas exploration could get windfall waivers of up to 90 per cent. He estimated that the Windfall Profit Levy could make a significant contribution to fuel subsidy measures, although the fate of this measure appears uncertain.
For poorer Irish families facing a nervous winter, there are reasons to argue for both of these measures of price caps and/or windfall taxes on energy companies.
However, it would be good to take a very close look at what is happening elsewhere before the government takes any action that could make the situation worse.
https://www.independent.ie/opinion/editorial/energy-price-caps-justified-but-lets-look-abroad-first-41878140.html Energy price caps are justified, but let’s look abroad first