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‘Doomsday scenario’ looms as oil prices rise

Motorists have been warned to expect petrol price rises after the cost of oil reached record levels on both sides of the Atlantic.

The surge in the price, caused by fears of a global shortage, has prompted fears of a £4 gallon at the pumps by the time of the General Election, experts said.

Petrol retailers said drivers should expect to see between 5 and 10p a litre - between 23p and 45p a gallon - on the cost of unleaded by polling day, expected to be May 5.

Volatility in the oil market led Chancellor Gordon Brown to freeze duty on fuel for six months in the Budget on Tuesday.

But motorists pay roughly 80p on every £1 spent on fuel and will face a 1.22p a litre tax rise, 5.5p a gallon when the duty increase does arrive.

Although that will not be until September 1, unleaded has already increased by 1.5p a litre to 81.5p in the past fortnight as the pressure on crude prices have increased. That is a rise of 7p a gallon to £3.70. Diesel is around 85p a litre, or £3.86 a gallon. The predicted pump rises would see fuel selling close to or even over £4 a gallon- 88p a litre.

The warnings came as the cost of crude oil in New York broke $57 for the first time yesterday to hit $57.50. In London, the price of Brent crude topped $55 a barrel for the first time, then rose to $56.15.

The rises were sparked by reports that America’s oil reserves are far less than expected – raising fear of shortages that will drive up the price even further as the main American summer driving season approaches.

Huge industrial demand from China is also adding pressure on prices.

Ray Holloway, of the Petrol Retailers Association, says: “I think we are looking at a minimum of 5p a litre or nearly 25p a gallon at the pumps by the time of election.

“But if the doom-mongers are right and there are other crises which drive up the price of crude even more, we could be looking at 10p a litre or 45p a gallon. That is not unreasonable. It’s the doomsday scenario.”

The oil producers’ cartel OPEC agreed to pump an extra 500,000 barrels a day and pledged yesterday to double that if prices remained high, probably above $55 for the next seven to ten days.

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