PETROL prices are set to average £1 a litre if political instability in the Middle East and voracious Asian and American consumers continue to drive up the cost of crude oil.
Several independent filling stations around Britain were charging more yesterday, reflecting a relentless increase in the price of a barrel of oil since the start of the year. The average cost of a litre of unleaded petrol climbed past 90p for the first time over the weekend and has now reached 90.05p, according to the price monitoring organisation Catalist. Diesel is almost 94p.
Adjusted for inflation, petrol is still not as expensive as it was at the height of the fuel tax protests in 2000, but it is the speed at which the price is rising that most concerns observers.
Ruth Bridger, of the AA Motoring Trust, said that motorists were paying more than 10p a litre more than in January. “It’s taken six or seven months to push up from 80p to 90p a litre, so if prices continue to rise at this rate we are looking at £1 a litre by January or February next year,” she said.
A typical British family owning two cars are already paying £23.32 more a month for their petrol compared with the start of the year, the trust said.
Some consumers are turning to more environment-friendly cars that use less petrol, such as the Toyota Prius, which has been popularised by the Hollywood star Leonardo Di Caprio. Sales figures from the Society of Motor Manufacturers and Traders (SMMT) show that 3,437 of the “hybrid” cars were sold in the UK between January and July, up nearly 30 per cent on the 2,712 vehicles sold in the same period last year.
But reducing their reliance on petrol will not protect consumers from the impact of rising oil prices, which invariably affect manufacturing costs. The hydrocarbons that make up petroleum are needed to make plastics, used in such diverse items as clingfilm and bulletproof vests. The effect of soaring fuel costs is already being felt here: last month Tesco reported that its plastic bag bill was running at £9 million higher than the year before.
Higher fuel costs also push up energy bills for industry, leading companies to consider putting prices up as the expense of distribution grows.Manufacturers’ input costs leapt by 13.4 per cent over the year, the highest for more than two decades.
Petrol prices have been rising because of the soaring price of crude oil, from about $10 a barrel in 1999 to $40 last year and a new high of more than $64 this week, driven by the global market. America’s appetite for oil traditionally peaks during the summer months when millions of families embark on long-distance driving holidays.
Added to that is a huge increase in demand from China and other expanding Asian economies, Ms Bridger said.
The latest price rises also reflect political uncertainty over the Middle East’s two main suppliers. In Saudi Arabia, which accounts for one in every seven barrels of oil consumed around the world, the death of King Fahd has been followed by the US closing its embassy and Britain giving warning of a possible imminent terrorist attack.
Iran, the second-largest oil producer in the region, has courted possible sanctions from Europe by declaring its intention to resume its controversial nuclear programme.
Compounding this is an unforeseen bottleneck in the global industry’s refining capacity, with nine US refineries either partly or wholly out of action, Ms Bridget said. “We’ve seen the price of a barrel go up from around $40 to just over $60 a barrel since the start of the year. If the price of crude oil hits $80 we will see £1 a litre for unleaded petrol at the pump on average,” she added. “It hits vulnerable people on a low fixed income, like pensioners, who rely on their cars to get around. Hopefully we will see a turnaround long before then. But a lot of people thought that the price would fall back before August and it hasn’t.”
In some rural parts of the country, where there is less competition, consumers have already become accustomed to paying more than £1 per litre for diesel and unleaded.
The Bridge Garage, in Marlborough, Wiltshire, is charging £1.05p per litre for diesel and 98.9p a litre for unleaded petrol. The manager said yesterday: “The prices are up on the board outside. If drivers don’t like them they don’t have to come in.”
A spokeswoman for the RAC said: “This garage seems to be profiting unduly on the back of increasing fuel prices.”
Ray Holloway, of the Petrol Retailers’ Association, said, however, that without the economies of scale that enabled supermarkets to sell petrol at a discount, many independent garages could go out of business.
WHERE IT HURTS
ON THE FORECOURT
Car owners have felt the price rises most keenly. Motorists are spending £7.5 million a day more on fuel than they were in January and the average price of a litre of unleaded petrol has passed 90p for the first time
ON HOLIDAY
Airlines are also struggling with soaring fuel prices and are passing on some of the costs to the customer. Last week British Airways announced that its annual fuel bill was likely to be £525 million above last year. In June, the country’s three biggest airlines — British Airways, Virgin Atlantic and bmi — increased fuel surcharges on long-haul flights by half because of the rise in cost of oil. Rail prices are also affected. Passengers using the First Great Western service are having to pay up to 6 per cent more to meet fuel costs.
AT HOME
Domestic utility bills will also feel the impact of oil price rises. Gas is a by-product of the oil drilling process and many of the power stations that generate electricity use oil or gas. As a result Powergen said this week that the cost of its electricity bills would rise by 7.2 per cent and gas charges would increase by 11.9 per cent from the end of August.
