Households filling their oil tanks are finding that the price of home heating oil has risen again, even though the Government cut the carbon tax on it in Budget 2027 last Tuesday.
The Budget reduced the carbon tax on kerosene and natural gas from €63.50 to €48.50 per tonne of carbon dioxide. That is the same rate as in 2023. The cut also cancels two planned increases that would have taken the rate to €78.50 by May 2027. Finance Minister Simon Harris said the rate will not rise again during the lifetime of this Government.
The tax cut is real, but it is small compared with the swings in the wholesale market. The Irish Times reported that it will reduce the price of a 900-litre tank by about €40, and cut an average annual gas bill by about €34. Other estimates put the saving on a 500-litre fill at roughly €22. When the cost of oil on international markets rises by more than that in a single week, the saving disappears.
That is the problem for households this week. Kerosene, the fuel used in most Irish oil-fired homes, is priced on global markets, and those markets remain under heavy strain. The conflict involving Iran has disrupted supply and cut refining capacity. Fuels for Ireland, the industry body, has said before that around 30% of the kerosene used in the EU comes through the Strait of Hormuz. EU energy officials met last week to discuss record diesel prices, with the EU average reaching €2.24 a litre at the end of September.
Irish households have already seen how fast prices can move. In March, soon after the conflict began, the average price of 500 litres jumped from around €500 to more than €760 in less than a week. An industry spokesman said the increase in kerosene prices was “far higher than in petrol and diesel markets.” Industry figures also note that Ireland is unusual in taxing home heating oil, while other EU countries do not.
The Government hoped the carbon tax cut would ease the pressure ahead of winter. The Budget also postponed the return of excise duty on petrol and diesel to February 28, 2027, and raised the Fuel Allowance by €5 a week to €43. Around 700,000 Irish homes still rely on home heating oil, so changes in price affect a large number of families, especially in rural areas.
The cut has also drawn criticism. The Economic and Social Research Institute (ESRI) said this week that the carbon tax reduction is not targeted at the most vulnerable, which makes it an expensive measure that will not encourage people to move away from fossil fuels. The Government took in more than €400 million in carbon tax from home heating oil and gas last year, so the cut also means less money for the schemes it normally funds.
The oil industry has meanwhile renewed its call for a review of the VAT charged on heating oil.
For households, the advice from consumer groups is familiar. Prices vary by county and by supplier, so it pays to compare quotes before ordering, to consider buying with neighbours in a group, and to avoid buying in a panic when prices spike. Heating oil prices can fall as fast as they rise, so waiting a few days can sometimes help if tanks are not running low.
With winter approaching and global oil markets still unsettled, the pressure on household budgets is unlikely to ease quickly.
