A surge in crude oil prices to a six-month high yesterday may force Chancellor Gordon Brown to extend a freeze on fuel duties for another year in the Budget, according to industry experts.
Mr Brown pledged to freeze duty levels in November 2000 until this month after public protests about high petrol prices almost brought the country to its knees.
At the time, when the oil price exceeded $30 a barrel, he said he would extend it for a further year if oil prices remained at a high price "between now and then". Yesterday the cost of a barrel of oil jumped $1.74, or 6.7 per cent, to hit $27.63 a barrel when the London market reopened after the four-day Easter break.
The rise was triggered by the escalation of violence between Israelis and Palestinians over the weekend and a call by Iraq for all Arab producers to stop supplying the US.
"For traders the general fear is that the violence could spread further unrest in the Middle East where two thirds of the world's petroleum reserves sit," said Lawrence Eagles, an analyst at brokers GNI.
Oil prices have risen more than a third this year and UK retailers reacted by hiking the price of a litre of petrol from about 69p to 73p in March.
The Petrol Retailers' Association said prices would rise again if the cost of crude climbed towards $30 a barrel.
Ray Holloway, director of the PRA, said he doubted the Chancellor could do more than increase duty in line with inflation, which might add another penny to prices.
"Delivering a Budget with prices at 80p a litre could be enormously risky," he said. "I don't think we will hear anything about raising duties."
Mr Holloway pointed out it was a rise in pump prices towards 80p a litre that contributed to the protests in September 2000.
Meanwhile, the gold price hit a two-month high of more than £305 an ounce after jumping £3 as investors sought safe havens amid the Middle East tensions.Reuse content