Petrol prices are set to soar again after the oil-producing cartel Opec yesterday announced a surprise cut in output, triggering a sharp increase in the cost of a barrel of crude.
The price of unleaded petrol is already due to rise by 1.28p a litre or nearly 6p a gallon next week as deferred Budget fuel duty increases come into effect.
But motoring organisations and oil experts said they now expected the increases to be even greater following Opec's decision to cut production by 900,000 barrels a day just as the peak winter demand period approaches.
Oil prices surged in response to the shock move, with the benchmark London Brent rising by $1.14 a barrel to end at $26.68 and US light crude trading $1.11 higher at $28.24.
The fleet and fuel management company Arval said that petrol prices had already risen by 2p a litre in the past two months to 76.6p. With next week's fuel duty increase in the pipeline and the threat of higher crude prices, analysts warned that petrol could soon cost 15p more a gallon than it did in mid-July.
"This is very much a triple whammy for the motorist and even a quadruple whammy if you happen to drive a diesel-powered vehicle," said the RAC Foundation's traffic and road safety manager Kevin Delaney.
In the City, oil stocks rose with BP ending the day 3.75p higher at 422.75p and Shell gaining 4.25p to 386p. But analysts also warned that higher oil prices could hamper economic recovery by curbing consumer demand, stunting business growth and forcing up interest rates.
"I don't think it's a major negative given the improving economic outlook, but on the margin when you have higher oil prices, it could crimp consumer spending," said Rich Nash, the chief market strategist of the US broker Victory Capital Management.
Paul Robson, an international economist with Bank One Corp in London, said: "If oil prices continue to move higher then interest rates in the G7 may need to be higher than they otherwise would be, which is not good for recovery prospects."
The Freight Transport Association said that the post-Budget duty increase alone would add £500 to the cost of operating a heavy goods vehicle in the UK. Arval, meanwhile, calculated that even without any Opec-inspired increase in petrol prices, a company with a fleet of 100 petrol-powered cars would be looking at a £150,000 increase in its fuel bill.
Opec ministers meeting in Vienna announced output from 10 of its members excluding Iraq would be limited to 24.5 million barrels a day from 1 November.
Iran's oil minister defended the move on the grounds that had it not acted now then the world could have been flooded with as many as 2.5 million barrels a day of surplus supply by the first quarter of next year. He also described the 900,000 barrel reduction as a "first move".
The recent fall in oil prices, which rose above $30 a barrel during the war in Iraq, coupled with the prospect of increased production by non-Opec members such as Russia swamping the market are thought to have swayed Opec's hand.
There is also the prospect of increased output from Iraq. The country is currently producing less than a million barrels a day barely half its output before the war but production is expected to begin picking up, potentially exacerbating the problem of over-supply. Attending its first Opec meeting since the US invasion, Iraq pledged to remain a full member of Opec, despite whatever influence Washington might bring to bear.Reuse content