Analysis: The disruption and confusion caused by Trump's on-off tariffs have already impacted worldwide energy prices - Dr. Paul Deane, Senior Research Fellow/Lecturer, Energy Policy and Modelling Group, MaREI Centre/Environmental Research Institute, UCC

US president Donald Trump's 'Liberation Day' tariffs caused havoc in international markets. The disruption has also impacted energy prices, leading to crude oil prices dropping to a four-year low. Similar consequences were seen for European natural gas prices.

The last time international oil prices were at this level, petrol and diesel retailed in Irish forecourts for approximately €1.50 per litre. While we will see prices reduce over the next number of weeks, they are unlikely to return to that level.

Ireland is a country that uses a lot of energy but produces very little, so we rely on others to supply it. The current trade war and associated economic volatility will impact the prices we pay for diesel and petrol, as well as our electricity bills, and this will play out in different ways for different reasons.

Most of the energy for fuelling our cars and trucks, heating our homes, and generating electricity is imported, and we pay international prices for these. This gives us limited control over its fundamental price, although the government can choose to lower the taxes.

Looking first at the price of petrol and diesel, which is influenced in part by international oil prices. In energy markets, sentiment and outlook are as influential in setting the price of oil as its physical supply. The current outlook for the global economy is for lower economic activity because of the uncertainty of Trump's tariffs and chaotic policy changes.

At a simple level, lower economic activity translates into lower physical activity across an economy, meaning businesses produce less, we purchase less, and there is reduced need for transport and movement of goods. The upshot of this is lower demand for products such as petrol and diesel and its core source, crude oil, meaning that the price of oil will go down. The impact of this sentiment or expectation is playing out this month, and the consequence is that the international price of crude oil has collapsed to a four-year low.

But the price of petrol and diesel in our forecourts doesn’t map directly onto the price of oil. This is because other elements such as exchange rates, refining capacity, supplier margins and taxes also impact on the price. The tax we pay on petrol and diesel in Ireland varies a little from month to month (due to VAT applied), but it was approximately between €0.90 to €1 per litre for the month of March.

This means that even if oil was free, we's still pay over €1 per litre. Given the movements in oil markets this week, the price of petrol and diesel will likely move between €1.60 and €1.70 per litre, but this could change quickly.

For our electricity bills, it is a different story as we also must factor in the weather as well as the unpredictability of the individual currently directing American policy. The weather in mainland Europe and even globally matters for us in Ireland because of natural gas. We purchase most of this gas internationally, a fuel which generated over half of Ireland's electricity last year.

The wholesale price of electricity in Ireland (which makes up about 40% of the final retail price) moves closely in lockstep with international gas prices. The latter are sensitive to weather because of the dual role of natural gas in both generating electricity and providing heating for homes and industrial manufacturing.

Europe experienced colder weather this winter and so consumed more natural gas from its gas storages. This stock is then replenished every summer by buying more natural gas from pipeline suppliers or gas that is transported on ships (known as liquefied natural gas or LNG) from outside of Europe.

Since the invasion of Ukraine, Europe has turned to the US to purchase shipped gas to replace pipeline gas from Russia. Last year, the US was the largest supplier of LNG to the EU, accounting for almost 45% of total LNG imports at an approximate market value of €20 billion. Trump has suggested that Europe should buy up to $350 dollars of energy from the US to rebalance trade deficits, but this is not physically workable.

Over the next number of months, natural gas prices will balance between conflicting push and pull factors. The increased demand due to the recent colder winter in Europe will look to push prices up, while the expectation that lower economic growth will look to pull prices down.

My view is that the negative sentiment for the global economy is a stronger pull, and European gas prices will hold stable over the next number of months. However, the fragility and volatility in the market remains, and I’d expect Irish retail electricity prices to stay similar to the current level without any significant reductions. Looking beyond the next two months, it is impossible to know what may happen with the only certainty being the uncertainty that lies ahead.