Treasury Secretary Paschal Donohoe must levy windfall taxes on energy companies’ “war profits,” business leaders have warned after gas prices in Europe soared 15% on Monday to hit new record levels.
Isme chief executive Neil McDonnell admitted it was unusual for a group of companies to request corporate tax increases, but the windfall taxes were needed because small businesses were facing an “emergency” and would be next to demand significant amounts from the government who go over their budget month.
“It’s not the usual thing we would advocate, but it’s fair that the government should take some of the profits to mitigate payouts to consumers and small businesses.”
The chief executive said further hikes in wholesale gas prices would only mean more profits for energy companies and higher dividend payments for their shareholders.
They will also likely result in higher energy bills for households, which are already facing an average annual increase in their electricity bill of €26 from early next month to keep the lights out this winter.
The rise in market gas prices on Monday doesn’t automatically mean bills for Irish households and businesses will rise by a further 15%, experts say, but gas is used by power stations across the country to generate a large part of the world’s electricity . Ireland grid.
Even before Monday’s price hikes, wholesale gas prices were up 11-fold.
Soaring energy costs were passed on to consumers and helped push consumer price inflation to levels not seen in many European countries for 30 or 40 years.
Economist Austin Hughes said Monday’s wholesale gas price increases would affect Irish gas prices.
Earlier this month Mr Hughes had estimated that Mr Donohoe would have a £1bn energy package in next month’s budget.
Yesterday Mr Hughes said customers are in for some kind of pain but said a package at the high end of his £2bn estimate is now on sale.
The rise in continental gas prices was one of the sharpest since the February 24 invasion of Ukraine.
It came after renewed fears over the security of gas supplies from Russia to the European Union and has stoked recession fears across Europe.
“The catastrophe is already here,” said Thierry Bros, professor of international energy at Sciences Po in Paris.
Belgian Prime Minister Alexander De Croo said Europe could face up to 10 difficult winters.
Chris Beauchamp, chief market analyst at online brokerage IG, said that “investors now think a recession in Europe and the UK is inevitable”.
On the futures markets, European wholesale gas prices for delivery to customers such as power stations and large energy-hungry producers such as cement makers reached as high as €295 per MWh in September before settling at €280 per MW-hour at the close of trading.
Inflationary pressures at the factory gate were clearly illustrated by new figures showing that wholesale electricity prices rose 83% in July from a year earlier.
Ireland has access to the Corrib field off the coast of Mayo for about a quarter of its annual gas needs and gets most of the rest from the North Sea.
Wind farms also account for a significant portion of total electricity use, but mainly in the late winter months when the Atlantic storms are blowing.
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