The average petrol price looks set to hit £1 a litre within weeks after oil prices surged to a record high yesterday on the back of mounting tensions in the Middle East.
Unleaded fuel prices hit an all-time record of 97.02p a litre yesterday, the AA Motoring Trust said. Prices have risen 2p a litre in the past month alone.
The price of crude oil, which feeds through to prices on the forecourt, surged to a record high for the second day in a row. In New York, prices vaulted the $78 a barrel mark, rising 80 cents to $78.40, before dropping back to close at $77.03; Brent crude in London jumped to a record of $78.03, before closing at $77.27. "I wouldn't be surprised if $80 is attained soon," Victor Shum, an energy analyst at Purvin & Gertz, said.
Ruth Bridger, a petrol price analyst at the AA Motoring Trust, said current petrol prices were based on oil prices in the low $70s two weeks ago. "Taking into account the current oil prices there will be further growth in the pipeline in the next two to three weeks," she said.
"Diesel will definitely go through £1 and if the oil price hits the $80 mark then I think petrol will follow. There's certainly more cost to come through the system."
The spike in oil prices was driven by a fresh outbreak of hostilities in the Middle East as Israel struck Beirut airport and bombed roads, power supplies and communication networks in a widening campaign against Hizbollah guerrillas.
With the Iranian nuclear stand-off worrying the markets, traders said there was a growing fear of a repeat of the 1970s oil embargo during the 1973 Arab-Israeli war.
Mike Barry, a director at London's Energy Market Consultants, said: "The speculators are out there panicking about Israel because they think it's going to spread through the Middle East."
But Edward Meir, commodities analyst at MAN Financial, said: "If there is any sense of stabilisation on Monday in Lebanon, we could see a slight relief-based sell-off set in. However, given the various balls in the air, we doubt anything approaching last week's normality will return any time soon."
The rise in petrol prices may alarm the Bank of England, as inflation is above target and rising. But analysts point out that the increases will depress consumer spending as households find they have less spare cash.Reuse content