New figures show that the annual rate of inflation rose to 3% in September, which is up from 2.3% in August and is the highest level in two years.
The Central Statistics Office's Consumer Price Index shows petrol prices rose by an average of 11.5% in September. Petrol now costs 22% more than it did this time last year.
The figures also show that the cost of energy-related products in Ireland has risen by 20% over the past 12 months as a result of higher global oil prices.
The hike in inflation is being blamed on the sharp rise in petrol prices last month, the ending of the Summer sales period, a large increase in health insurance premiums and the continuing rise in average mortgage repayments.
Nevertheless it was the global oil price hike that had the biggest effect.
The fear now is that the increase in fuel costs could have a knock on effect on the rest of the economy, especially since they have caused a spike in inflation just as the talks for a new three-year national pay deal are about to take place.
Workers and trade unions will see higher prices as a reason to push for higher wage increases.
Employers and the Government on the other hand will argue that wage increases should be determined by productivity and that has been falling.
It is a difference of emphasis that could make agreement in the national pay talks much more difficult in the months ahead.
Commenting on the inflation figures, the Governor of the Central Bank, John Hurley, warned that the ECB has become strongly vigilant in case there are any knock-on inflationary effects from the recent strong rise in energy prices.
Mr Hurley said it is critically important to anchor inflationary expectations and ensure that the recent price rises do not become embedded in the economy.
