Tumbling oil prices bring cheer to hard-pressed Northern Ireland households
...but there may be a long-term price to pay for sections of our industry
Northern Ireland households are benefiting from the lowest oil prices for 11 years, but the long-term consequences may not be so positive, it has been claimed.
Oil has plummeted to its lowest price since 2005 amid mounting tensions in the Middle East and over-supply.
Brent Crude slumped by more than 2% to 34.83 US dollars a barrel at one point yesterday, as diplomatic relations between Saudi Arabia and Iran continued to deteriorate.
Oil prices have come under pressure from a strong dollar and a slowing Chinese economy, while major exporters such as Saudi Arabia and Russia have maintained output levels to hold onto market share.
But with households in Northern Ireland - where incomes are lower than other parts of the UK - paying a higher proportion of their incomes on essentials like home heating oil, the fall in oil prices is good news in the short-term.
According to the Northern Ireland Consumer Council, on December 31 the average cost of 500 litres of home-heating oil was £143.55 - 56% cheaper than peak prices of £329.07 in March 2012.
Richard Williams, its head of energy, said 68% of Northern Ireland homes were heated by oil, and 42% were in fuel poverty. "The drop in prices means it is more affordable for people to heat homes," he added.
But he urged people to shop around by checking prices on the Consumer Council website.
PwC chief economist Esmond Birnie said the oil price falls meant "households and firms now have more disposable income to spend on other things, so that helps to grow the economy. Falling oil prices contribute to the near zero inflation, that in turn helps to keep Bank of England interest rates down."
But at a wider level, it was not an entirely welcome trend, he said, adding: "The effect of low oil prices has probably not been as positive as some had hoped.
"Expansionary effects in oil-importing Europe and Japan may have been more than outweighed by the negative effect on oil-exporting countries such as Saudi, Russia, Nigeria and Brazil."
Stephen Kelly, chief executive of Manufacturing NI, said the oil price was good news for most manufacturers but that it was not being fully reflected at the pumps. "We would have expected that hauliers and shipping companies should have seen better savings and these being passed on to customers," he added.
He also insisted that low prices were causing difficulties for oil and gas firms, as well as dragging down other commodities.
"Our important quarrying equipment industry is feeling this cut in investment in extraction businesses," Mr Kelly said.
Ulster Bank chief economist Richard Ramsey said Middle Eastern tensions by themselves should send prices upwards - but instead over-supply was pushing them down.
Not only was China's slowdown having an impact on oil prices - he said it would ultimately affect equipment firms in parts of Northern Ireland.
"The concern is for firms here who have direct exposure to companies with a direct exposure to China," Mr Ramsey added.