Paul Hopkins: You'd miss the good old days of the 1970s
An oil crisis back then and embarrassing hairstyles notwithstanding, the 1970s were the good old days. I thought we never had it so good. And it seems I was right. A study suggests our global prosperity peaked in 1978, and it’s been downhill ever since.
Governments have tended to build economic policies around what we term Gross Domestic Product (GDP) – the sum of all money transactions in any given economy. Such GDP has risen fairly steadily — and often dramatically — since World War II, implying we have all become much more prosperous. However, critics now point out that GDP only tells half the story for it fails to account for social factors and environmental damage, not to mention carbon taxes or wars on Iran.
Economists now use a more comprehensive set of measures for economic progress. GPI: no, it's not a satnav but the Genuine Progress Indicator which adjusts expenditure to account for social and environmental costs, such as pollution, crime and inequality, and for beneficial activities where no money changes hands such as housework and volunteering.
The Government's €253m spending towards alleviating the soaring prices of energy may help motorists and hauliers and those in receipt of social welfare, but has done little to offset heating bills for the majority. And what benefit it does in the interim will be negated by that forthcoming carbon tax.
However, there is worse to come and it will offset the Coalition's current bandaid solution with food prices set to soar by up to 10 per cent due to the war in the Middle East. Retail expert Damian O'Reilly says this will see families having to spend up to €700 more a year to feed themselves.
O'Reilly, a senior lecturer in retail management at TU Dublin, says higher oil prices will feed into higher food prices within weeks, even if the war on Iran stopped tomorrow. And prices on the supermarket shelves would start rising even more than they are currently within the next two to six months.
He bases his prediction on an analysis of data on crude oil price spikes and how that feeds into inflation.
The cost of filling a shopping trolley will jump anywhere between eight and ten per cent, he says. This will mean shopping costs would go up by between €50 and €60 a month, or up to €720 over a year. Even if crude oil prices stay above $100 that still feeds into higher food prices.
"Evidence from oil price increases that sustained over several months show there's a significant increase in the price of food that seems to follow an oil price rise. The most recent example has been the Ukraine war,” he told RTÉ. Food prices would be affected by higher transport and logistics costs, the cost of refrigeration, fertiliser costs, farm machinery prices and packaging costs.
Chief economist at Bank of Ireland Conall Mac Coille said Brent crude oil prices are likely to fall to around $89 a barrel by the end of 2026. Mac Coille also said the impact of higher petrol, diesel and home-heating oil prices are still likely to push up inflation rates.
We hardly need replies to questions in the Credit Union Consumer Sentiment Survey to show that many consumers are bracing themselves for a major hit to their finances as the year progresses with rising bills and the cost of living.
Meanwhile, the Economic and Social Research Institute (ESRI) think-tank and the Central Bank both warn of inflationary pressures in the economy as higher oil prices begin to bite. The ESRI predicts headline inflation in our economy will rise this and next year.
A more prolonged conflict in the Middle East with an extended spike in energy costs could see "price rises across a wide range of goods and services” resulting in higher inflation and a dampening of economic activity. Even if the conflict ends soon there will be a lasting impact on prices, it says.
Advising someone to layer up on clothing to stay warm is pretty basic advice and common sense. However, to suggest that people "shop around" for fuel or food while, even with a decent two-wage income, one parent is worrying about children and whether to eat or heat while the other is wondering if there will be enough petrol to get to and from work by the month's end, is pushing people's patience – and potential poverty – one step too far.
Meanwhile, you could always try Micheal Martin's Irish solution to an Irish problem ... drive slowly or take the bus.