Why are fuel prices so high and where are they set to go next?

The Forties repairs are expected to be completed early in 2018, which should help ease the upward price pressure

Ben Chu
Economics Editor
Saturday 23 December 2017 01:34
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A crack in the “Forties” pipeline was discovered earlier this month during a routine inspection
A crack in the “Forties” pipeline was discovered earlier this month during a routine inspection

UK petrol prices are spiking this Christmas to a four-year high mainly because of disruption in the North Sea supply of oil.

A crack in the “Forties” pipeline was discovered earlier this month during a routine inspection. The pipeline, which supplies half a million barrels a day to the UK market, or around 40 per cent of the total, has been shut down for repair.

A fire at a major European gas supply hub in Austria has also increased pressure on continental energy supplies and therefore boosted fuel prices.

The Forties repairs are expected to be completed early in 2018, which should help ease the upward price pressure.

Yet oil prices have actually been rising since June, when a barrel of oil cost $45. Today the price of a barrel of Brent crude is $65. Could that underlying rising trend continue, dragging up pump prices in their wake into 2018?

Forecasting the oil price is tough, but some analysts think not. “We think oil prices will come back down and that should bring down petrol prices,” said Tom Pugh of the consultancy Capital Economics, citing expectations of an increase in supply from US producers and hopes of an easing of tensions between Saudi Arabia and Iran in the New Year.

Capital Economics has pencilled in oil prices by this time next year to be back down at €55 dollars a barrel, which is also roughly in line with the price implied by futures markets.

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