The cost of fuel — both petrol and diesel — is very much uppermost in Irish drivers’ minds right now, and unsurprisingly so. Recent geopolitical events have caused a massive spike in the price of petrol and diesel at the pumps, one that has triggered national protests as well as just making us all pay more for our driving.
It’s well known that taxes paid to the government makes up the vast majority of the price per litre of both petrol and diesel. But what is the actual cost of fuel? Out of a litre that you put into your car and pay for, where is each cent going?
First, there’s the liquid fuel itself. When you buy petrol or diesel, you’re buying a finished product, one that originally started as a thick, gloopy liquid that is extracted from under the ground in the Persian Gulf, or under the waters of the Gulf of Mexico or the North Sea. That’s the crude oil, which has to be refined into separate mixtures to create the fuels we use.
To do that, crude oil is heated to very high temperatures, which causes the lighter, more volatile chemicals to evaporate, allowing them to be collected through a complex series of coolers and refiners. At the top of the chain, the lightest and ‘purest’ elements will form petrol. Next down the list is a collection of fuel molecules called Naphtha, which are generally used for industrial chemicals. Below that are heavier mixtures which make up kerosene (for aviation fuel); then diesel fuel, and finally ‘fuel oil’ (the really heavy diesel that gets used in marine engines for large ships) and at the bottom the bitumen that goes to form the tar on our roads.
These refined fuels then have to be collected, shipped, pumped and transported to your local filling station.
All of that drilling, extracting, refining, shipping and the cost of running the filling station, accounts for around 40 per cent of the price of petrol, and 43 per cent of the price of diesel.
Then come the taxes. The biggest tax charged on fuel in Ireland is excise duty — also known as the Mineral Oil Tax. Currently, this is being discounted due to the spike in fuel prices, but it normally runs at around 45 per cent for petrol and 43 per cent for diesel.
Then there’s VAT, which is charged at the standard rate of 23 per cent on both fuels.
Next in the price chain is the carbon tax, originally introduced in 2010 and which, following the legislated-for annual rise in Budget 2026 last October, now costs €71 per tonne of carbon dioxide emissions. Breaking that down into a per-litre cost, it means that the carbon tax adds nine per cent to the cost of petrol, and 9.8 per cent to the cost of diesel.
There’s a further cost, which is the NORA levy. NORA is the National Oil Reserves Agency, a government department whose job is “to fund the acquisition and storage of strategic oil stocks.” That adds 2c per litre, or around one per cent per litre (and which, again, has been temporarily discounted during the current fuel price spike).
There’s a final charge, which is not paid to the government, and which is not necessarily charged by your local fuel supplier, but which is known as the ‘Better Energy’ levy, which is applied by some fuel companies as a way of funding their obligations to reduce greenhouse gas emissions. It adds only 0.08c per litre, a negligible amount.
It’s also true that petrol retailers very often sell petrol at a loss, or at a very marginal profit. Most retailers will barely break even on their fuel sales, and will instead make their profits on items sold in filling station shops — sandwiches, coffee, soft drinks, sweets etc.
For the purposes of illustration, let’s take €1.80 as a baseline price for the cost of fuel (it was where petrol and diesel roughly stood before the fuel crisis of early 2026). It means that for each litre, you give 74c to the oil companies, refiners, transporters and the fuel retailer; 54c goes to excise duty; 16c to carbon tax; 33c to VAT; 2c to NORA; and 0.08c to Better Energy.