When Brent oil prices are close to $120 a barrel at lunchtime and have fallen to $107 by the time of the Nine O’Clock news – as happened on Thursday – trying to work out how Government should respond is not easy. While some delay to see how things panned out was wise, it looks like the Government will act after next week’s Cabinet meeting.

Something to help less well-off households and a temporary cut in excise duty may be on the way, along with specific measures aimed at hauliers and exposed businesses. But the political challenge is to knock on the head the idea that everyone should be insulated from all additional costs.

In public debate in Ireland, the budget constraint does not exist. For now, the billions from corporate tax payments continue to roll in. If you want to half fill the glass, this means that the Government does have the resources to act to help those hit hardest and, unlike many other administrations, does not have to scrabble around to find the cash. The half-empty view is that it is best not to bet on this tax windfall continuing forever.

A few things this week underline this point. The background online debate in the US about the massive $300 billion in annual profits declared by big US multinationals in Ireland and, in the first instance, taxed here, is worthy of note. So is a new tariff investigation from the Trump administration, which has again pointed to Ireland’s huge trade surplus with the US as an issue to be addressed. Meanwhile, a report published this week by University of Galway professor Alan Ahearne and funded by the Collison brothers, who founded Stripe, warned that geopolitical change meant Ireland could not rely on inward investment continuing at the pace we have seen in the past.

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This all calls for caution in putting together a support package that could undermine promises to maintain current spending at the target level set out on budget day. These promises were contained in a new medium-term financial framework only published at the end of last year.

The first thing to understand about higher energy prices is the obvious one – they are a cost to an energy-importing country like Ireland. Compensating households or businesses means money must come from elsewhere; in Ireland’s case there is enough leeway in the national finances to take up the slack in the short term, but this is still a cost to the State.

A good guide for any measures is that they be targeted as far as possible and temporary in nature. Wholesale energy prices could be back around pre-war levels by summer or way higher than they are now. Or we could still be in some uncertain middle ground. The Government needs to avoid expensive new longer-term commitments.

But it also needs to save some bullets in case the more serious economic scenario does emerge before we head into next winter. And warning from the International Energy Agency on Friday were concerning in relation to the potential impact on energy supply if the war drags on.

In the short term, lower-income homes could be helped by special fuel allowance payments – for which 470,000 households qualify – or an extension on the 2026 payment beyond its scheduled end-April date. Other welfare measures may also be considered.

Lowering fuel costs through lower excise duties is less targeted, though it is the route many EU countries are taking and would hold down inflationary pressures a bit. Keeping diesel and petrol prices down benefits the better-off in their big Range Rovers as well as those trying to find money to fill a tank of heating oil – and here we get into the debate on who needs compensation versus who just feels they are entitled to it.

But in some form it will still happen, at least on a temporary basis. Tánaiste Simon Harris confirmed on Friday evening that lower excise duty on fuel was the likely route forward. And special measures for hauliers are also certain.

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But calls for a general return of household energy credits should be dismissed. Electricity and domestic natural gas prices have not increased yet and are unlikely to do so for some time. And because they are paid to everyone, these credits are expensive, costing €1 billion-plus in a number of recent budgets and €570 million in the 2025 package, the last time they featured.

Survey evidence showed that half of all households said they did not need them to pay their bill – and it is a fair bet that more could have managed fine without them. A real issue, if the crisis worsens, will be how to target lower income working people - the real squeezed middle.

Doing enough for now is the challenge for Government, leaving scope to roll back or ramp up as events play out.

As well as households, the risk of a competitiveness shock to businesses in the months ahead needs to be on the agenda. The European Commission is loosening state aid rules and other countries – such as Germany – are stepping in to help their firms. Again, targeting is the challenge.

While the State is in a good place financially, in energy terms it is exposed on a number of fronts. Costs are already high for businesses and households. And Ireland’s route to a low-carbon future – winding down the State’s reliance on volatile fossil fuels – involves long-term targets which will be missed due to offshore wind running way behind plan – and real short-term issues about energy security and the transition that lie ahead.

All this was discussed in 2022 after Russia invaded Ukraine, but while short-term supports were put in place, not a lot was done on the longer-term issues. The Government has committed cash to upgrading the energy network and is trying to speed up offshore wind development, but it will be well into the next decade before this comes on stream. Reports over the past week from the Economic & Social Research Institute and Trinity College Dublin have highlighted how far behind Ireland is in its transition to low-carbon households and transport, and how lower-income families in particular struggle.

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An official taskforce has been due to examine vital issues, including the pass-through of wholesale costs and the charges to energy bills which come from areas other than energy prices, such as the costs allocated for network improvements. But it has yet to reach any conclusions. Plans for an offshore liquefied natural gas (LNG) storage facility to increase energy security may take years to deliver – Donald Trump wants Ireland to buy more US LNG, but the State has nowhere to put it.

All these lessons were pushed into the background after the Ukraine war spike in prices ended. Now they are back in the spotlight. Ireland has already been fooled twice. Best not to let it happen a third time.

© The Irish Times