The ESRI has warned that the price shock resulting from the conflict in Iran is expected to be “greater and more prolonged” than initially predicted.
Dr Claire Keane told the Oireachtas Committee on Budgetary Oversight that the ESRI’s earlier projections were based on the assumption that “oil and gas price pressures would moderate towards the end of 2026”, reports RTE.
She said this assumption had prompted the ESRI to revise its inflation forecast for this year to above 3%.
However, she said the “crisis now appears likely to be more prolonged in nature and therefore the price shock will be larger and longer-lasting than built into that early forecast”, reports RTE.
The economist said any additional budgetary pressures are likely to “put pressure on our ability to deliver on the longer-term infrastructure deficits such as housing, healthcare and transportation”.
Dr Keane warned that “hard choices will have to be made” and said any supports introduced “should be financed from within the current spending limits rather than from additional expenditure”, reports RTE.
She added that any future emergency interventions should be “targeted and explicitly temporary, with a clear distinction from longer-term structural reforms”.
Research carried out by the ESRI also found that the fuel allowance could be “better targeted” in order to support vulnerable households more effectively, reports RTE.
Dr Keane said revised forecasts contained in the Summer 2026 Quarterly Economic Commentary are due to be published at the end of June.
She also said previous ESRI research found that every 30% increase in oil and gas prices resulted in a 1% rise in consumer prices in Ireland, reports RTE.
The ESRI further warned the committee that an “ongoing reliance on fossil fuels” leaves Irish households and businesses “exposed in the long-run” and weakens economic growth.
Dr Keane also said that if the Government’s “recently introduced measures are not unwound in a timely manner, they will hinder our ability to reduce energy demand and incentivise the uptake of sustainable energy technology”, reports RTE.
Academics from the UCD School of Economics and the Energy Institute also told the committee that energy prices are “likely to remain high until at least the end of the year”.
They said this means action will need to be taken before winter arrives, when “heating will be needed”, reports RTE.
Professor of Energy Economics Lisa Ryan also urged the Government to regard the “transition to clean energy as a national emergency”.
She warned that Ireland faces an “acute exposure” to the global energy crisis because of an “over reliance on fossil fuels”, reports RTE.
Adjunct Professor at Trinity College John Fitzgerald said the Government should “hoard resources to be able to provide proper protection for those on low incomes and the unemployed, who would otherwise freeze next winter”.
“In the most serious case, where Ireland is worse off by 2.5% (or even 5%), there is no way that the Government could protect the bulk of the population from the consequences,” he said, reports RTE.
He added that “we face a serious crisis” and said the Government “should keep its powder dry”, reports RTE.
Not a single cent paid to farmers and contractors – Lawless
Meanwhile, Aontú TD Paul Lawless said that not a single payment has yet been issued to farmers and contractors under the fuel support scheme.
He said the scheme is capped and noted that the closing date of 27 May falls during one of the busiest periods of the farming year, reports RTE.
He also argued that it is unfair to require applicants to provide receipts covering the entire previous year.
Mr Lawless said carbon tax figures paint a very different picture from the Government’s claims, reports RTE.
He said the Government is expected to collect €200 million more in carbon tax this year than last year, and claimed that half a billion euro raised between 2020 and 2023 was never spent on climate action measures.
Speaking about the NORA levy, he said the fund currently holds a surplus of €278 million while farmers are “desperately calling out for help”, reports RTE.
The Taoiseach rejected claims that the fuel support package was inadequate and said the measures available to farmers are comprehensive.
He said every effort would be made to support farmers and contractors, adding that it was reasonable for the scheme to be based on previous fuel usage, reports RTE.
On the issue of carbon tax, he said the money raised is used to support lower-income households, farmers and home retrofitting schemes, and that €4.2 billion from carbon tax revenues has been allocated to those areas since 2020.
He said that in 2025 alone, €558 million had been allocated for solar PV measures, along with €350 million for welfare supports and the fuel allowance, reports RTE.
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