Oil prices to stay high, warns BP chairman

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The Independent Online

Oil prices are set to stay high, bringing further misery for motorists, the chairman of BP warned yesterday. Lord Browne, the head of Europe's largest oil company, said prices are likely to remain high in the short term because of concerns across the world over supply.

Oil prices are set to stay high, bringing further misery for motorists, the chairman of BP warned yesterday. Lord Browne, the head of Europe's largest oil company, said prices are likely to remain high in the short term because of concerns across the world over supply.

"One day [oil prices] will come down, but not in the very short term, I'm afraid," he told the BBC's Breakfast with Frost programme. "I doubt it will spike very much higher."

Crude oil rose to a record in New York trading last week, while the price on the London market broke through $40 a barrel to hit a fresh 14-year high.

Lord Browne said the price of petrol was linked to prices of crude oil, which have hit new highs in recent days amid concerns about the stability of production in Russia and Iraq.

Petrol prices on British forecourts have risen across the country from an average of 79p a litre to 82p over recent weeks. Some service stations added on another penny after last week's oil price rise.

The last time petrol costs rose that high, four years ago, an alliance of lorry drivers and farmers almost brought the country to a halt by blockading oil refineries, forcing the Government to abandon its plans for automatic annual rises in duty.

Last month, Gordon Brown postponed a planned 1.42p rise in duty that was due to take place next month until the pre-Budget report expected in November. But Lord Browne said he believed the Chancellor was unlikely to abandon the increase, given the scale of the windfall received by the Government through petrol taxes.

Prices have risen on fears of a sharp slowdown in output from Russia as investors fret over a stand-off between the Russian authorities and Yukos, the country's largest oil firm.

Lord Browne said supplies at the moment were "a little bit uncertain" due to the unstable situation in Iraq and some other countries, where production had been "switched on and off".

But he said there should be no cause for concern that global oil production would not be able to meet demand. "The tank is not really running dry," Lord Browne said. "There's an enormous amount of oil in the world and it will be produced."

Lord Browne was confident about Russia, where BP has a burgeoning joint venture. He said the trial of the founder of Yukos was more to do with politics than the industry. Mikhail Khodorkovsky, its politically ambitious founder, is currently in jail awaiting trial over charges of tax evasion and fraud.

"Yukos is a special circumstance," he said. "It is about ... what Yukos was doing outside its own activity in the political sphere. Clearly this is something to do with Khodorkovsky, not I think with Yukos itself."

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