SURGING OIL PRICES amid the ongoing war in the Gulf region have heightened fears about the shockwaves the rest of the world may yet feel.

Today’s jump – seeing oil hit $100, or €86.55, a barrel – comes as the US and Israel’s ongoing war on Iran fuels fears of a prolonged disruption to global energy supplies.

The spike has been driven largely by disruption in the Strait of Hormuz, the narrow shipping lane between the Persian Gulf and Gulf of Oman through which roughly a fifth of the world’s oil supply normally passes.

In Ireland, the price at the pump has also surpassed the €2 mark for diesel at a growing number of forecourts around the country.

When The Journal phoned around a number of economists today, nobody was totally sure how high it could go, but there is a strong belief that it will continue to rise, as long as ships can’t pass through the Strait of Hormuz.

Looking back at our most recent experiences of rising energy prices, during the early months of Russia’s war on Ukraine, there is a belief that this crisis “could be worse from a petrol and diesel perspective”, according to Dan O’Brien of the Institute of International and European Affairs (IIEA).

“It’s not really about the war itself. It’s just about the strait,” O’Brien said.

There are suggestions that the US could ensure the Strait opens via military means, and Donald Trump could try and needs and subsidise insurance for the tankers. But if it stays closed, then we’re looking at very high oil prices and those prices could be higher than even after the Ukraine invasion.

Emma Howard, an economist and lecturer at TU Dublin, said there are suggestions that oil could reach close to $150 a barrel, which would be “exceptionally high by historical standards”.

As a comparison, oil prices reached their highest level in history in June 2008, when crude hit a peak of $147.50 a barrel.

Despite rising prices at the pump in Ireland here and elsewhere, a number of economists have cautioned that we should not fall into the trap of recency bias and be too quick to liken the current crisis to the inflation seen during the onset of the Ukraine war.

O’Brien, of the IIEA, said that period saw significant rise in consumer prices across the board because of a “quadruple whammy” unique to where the world was in 2022.

“There was the huge fiscal stimulus in the US, which affected goods prices,” O’Brien said, referring to the investment programme by former US president Joe Biden. “There was the surge in demand everywhere, there was supply chain issues as companies got used to dealing with a reopening, and then there was the energy shock from the war.”

Lots of concerns about inflation now, and much comment that higher energy prices cause non-energy prices to rise too. While that it true, the effect is limited.
In the 20th century that was most evident in the 2010-12 period when energy prices rose at around 10% for three… pic.twitter.com/mW2mlHq2JW

— Dan O'Brien (@danobrien20) March 9, 2026

What the Irish government might do

There is increasing focus on how the Irish government might respond to the turmoil.

In an interview on RTÉ yesterday, Minister for European Affairs Thomas Byrne said it might take action on easing the pressure of the rising cost of petrol and diesel on consumers, but he was against a measure such as cutting the scheduled carbon tax increase.

Government has been called upon to cut some of the tax and excise levied on motor fuel to alleviate the pressure on motorists. Motor fuel is taxed through various means, with 65% of the cost of a litre of petrol taxed, while the cost of diesel is 60% tax.

These taxes include excise at a fixed rate, Carbon Tax, and VAT applied at 23%. There are also two additional taxes: better energy at the cost of 8c per litre, and a 2c per litre tax National Oil Reserves Agency (Nora) levy.

However, Howard from TU Dublin was strongly against one-off measures:

“So-called one-off measures after the last crisis were repeated three times: these further add to inflation because you are essentially giving money to people who don’t need it. But the long-term solution should be decarbonising and reducing the use of these fossil fuel sources, as transport is the second-biggest emission sector.”

Instead, any reliefs should be targeted and soften any rapidly increasing costs for groups such as the “over 300,000 people in arrears on their energy bills”, Howard added.

We need to be focusing any policy measures on those and not further cuts to VAT. A universal cut that cushions everybody is really bad policy.

Other measures

Another measure is for countries to release oil from their strategic reserve which Howard said would at least mitigate the current big spike in oil prices.

“It may be the case that there are political motivations for the US to release some of those reserves because of the midterms coming up in the US, to ease those increases in inflation and prices that consumers are facing,” she added.

Other measures being pursued include the Croatian government today announcing that it’s going to cap petrol and diesel prices from tomorrow. Diesel will be €1.55 and petrol will be €1.50 under the proposal.

O’Brien deemed this measure “insane” and said it could well end up restricting supply of oil into the country as exporters go elsewhere.

“The Irish government needs to sit tight for the moment. We’re only about 10 days into this and it’s too early to say we need to rush out a policy response,” he added.