MOTORISTS are facing a rise in fuel prices after petrol retailers sounded warnings that they would be forced to pass on a surge in the cost of crude oil to the forecourt.

Prices for a litre of unleaded could rise by as much as 5p by Easter, according to the Petrol Retailers’ Association.

The warning came after the price of North Sea crude rose to a new record level on Thursday, hitting $53 a barrel — the highest in 17 years. The latest spike in crude prices came as oil demand was buoyed by the cold snap gripping Europe and the northeastern United States. Speculators also drove prices higher on Thursday after a sabre-rattling statement by Adnan Shihab-Eldin, the acting Secretary-General of the Opec oil cartel, in which he talked of oil at $80 a barrel.

However, Mr Shihab-Eldin said such as jump in price was a “low probability” and would be triggered only by a “major supply disruption”.

Opec was last night expected to try to calm oil markets by delivering sufficient production to avoid spikes in crude prices. Ray Holloway, a spokesman for the petrol retailers, said that crude at $80 a barrel was a “worst-case scenario”. But, he added, if this occured in the spring, as America built fuel stocks, “prices would go through the roof”.

Although such an outcome is unlikely, the prospect of higher oil prices would be bad for the Government in the run-up to an expected May election. Rising fuel costs will do little to bolster a shaky electoral “feelgood factor” while there are jitters from a house-price downturn.

But economists emphasise that the inflationary consequences of higher oil and petrol prices are likely to be limited, unless they trigger an outbreak of spiralling pay demands.

Because most motorists will pay for higher fuel prices, rather than cut mileage, costlier petrol acts like a tax, diverting money from other spending. In turn, this acts like a damper on the economy, reducing price pressures elsewhere, so offsetting the increased cost of motoring. Across the economy, Britain, like other rich countries, also now uses much less fuel much less intensively than at the time of the Seventies oil crises. Crude prices would need to reach $80 a barrel or more to return to the levels hit in the Seventies in real terms.

Business, pages 64-65

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