The distributional impact of energy price increases in Ireland and the policy response
In late February 2026, Iran closed the Strait of Hormuz to commercial traffic in response to coordinated military strikes conducted by the United States and Israel. The Strait is one of the world’s most important trade routes, through which approximately 20 per cent of global oil and liquefied natural gas supplies pass from the Gulf states to international markets. The closure provoked an immediate and substantial increase in global energy prices, with the effects felt most acutely in energy-importing economies, particularly across Asia and Europe. This price shock comes soon after an apparent stabilisation of energy prices, which had experienced significant volatility caused by the Russian invasion of Ukraine.
Recent surges in the cost of oil have caused a reemergence of cost-of-living pressures faced by Irish households and businesses, especially with regards to energy costs. In late March 2026, the global price of oil surpassed $100 a barrel and has fluctuated around this mark since. This contributed to substantial price increases at fuel forecourts around Ireland, with average diesel and petrol prices exceeding €2 and €1.80 per litre respectively. Recent data suggest household heating costs have experienced similar volatility, with home heating oil prices rising by over 63 per cent year on year in March (CSO, 2026). In response, the Government has announced two packages of temporary supports for households and industry.
On 24 March 2026, the Government announced a package of temporary measures, at an estimated total cost of approximately €250 million. Excise duties on petrol and diesel were reduced by 15 cent and 20 cent per litre respectively, with these reductions intended to last until the end of May 2026. The National Oil Reserve Agency (NORA) levy, of 2 cent per litre, was simultaneously temporarily suspended, providing a further reduction in fuel costs. In aggregate, these two measures reduce the effective government levy on petrol by 17 cent per litre and on diesel by 22 cent per litre. A reduction in excise of 3 cent per litre was also applied to marked gas oil or green diesel. The package also included targeted supports for households. The Fuel Allowance season was extended by one month to April, with approximately 470,000 households benefitting from the €38 per week extension, amounting to an estimated €152 per eligible household in total. Finally, the maximum repayable amount under the Diesel Rebate Scheme – which repays some of the Mineral Oil Tax paid by a qualifying road transport operators – was increased from 7.5 cent to 12 cent per litre of diesel, backdated to January 2026, partially offsetting cost pressures faced by hauliers and other fuel-intensive businesses.
Following well-documented public protests and political pressure, the Government announced a further package of fuel supports on 12 April 2026. These included a further 10 cent reduction in excise duty on petrol and diesel, extended to the end of July, and a deferral of the planned carbon tax increase from May to the Budget in October. A further 2.4 cent reduction in excise on green diesel was also introduced. Additional targeted measures for the road haulage, transport, agricultural and fisheries sectors were also announced. In total, this second package of measures is estimated to cost €505 million.
At the time of writing, the increase in price levels is difficult to measure, and it varies with political announcements and other developments related to the ongoing conflict and the passage of traffic through the Strait of Hormuz The timing of price increases also differs depending on the energy source: the price of petrol, diesel and home heating oil rose immediately while the price of electricity and gas is expected to rise with some delay due to hedging strategies employed by suppliers. The magnitude of the price changes is also heterogeneous. In April, following government interventions, average diesel price surpassed €2.11 per litre, up 24 per cent on the 2025 average, and petrol exceeded €1.88, an 8.2 per cent rise on the same baseline. Home heating costs have experienced more significant volatility with prices of home heating oil rising to over €1,480 per 1,000 litres in April, an increase of 52 per cent compared to the 2025 average (European Commission, 2026). Wholesale electricity prices increased by 19 per cent in March although this price increase has yet to be passed on to households.