Petrol prices to rise after head of OPEC warns of sharp fuel hike
By Robert Winnett, Deputy Political Editor
Last Updated: 12:30am BST 27/06/2008



Driving lesson: A woman fills her car at the pumps

British motorists face paying almost £75 to fill their cars with petrol this summer after the head of OPEC warned that further sharp fuel price rises are imminent.

The price of oil is forecast to increase from $135 a barrel to between $150 and $170. Petrol is expected to increase in price to up to £1.32 a litre and diesel could rise to £1.47.

Is there still money to be made in oil?

Gordon Brown is now under intense pressure from Labour backbenchers to scrap planned increases in motoring taxes. MPs are understood to have held private meetings with Alistair Darling, the Chancellor, over the past few weeks and may attempt to block the finance bill next week if concessions are not promised.

The expected sharp rise in the oil price will increase pressure on the Government and MPs to take action with many families using their cars for summer holidays which will now cost far more than expected.

Mervyn King, the Governor of the Bank of England, told a Parliamentary Committee that the British public should be prepared for their standard of living to remain "on hold" for the next year.

The AA said that the imminent fuel price increase posed a serious threat to Mr Brown's ongoing tenure at Number 10. Edmund King, the president of the motoring organisation, said: "Such increases as those predicted by the Opec president would push the price beyond which two thirds of AA members would consider voting for another government.

"The Chancellor surely would not want to add oil to the fire by increasing fuel duty in October. Eco driving can help motorists in the short-term but in the medium term more pressure is needed on OPEC and the speculators to bring prices down."

The oil price prediction was made by Chakib Khelil, the Algerian Energy Minister and president of the Opec group of oil-producing nations, in an interview with French television. He also warned the price could rise even further if action is taken against Iran.

"I predict probably prices of 150 to 170 dollars this summer," Mr Khelil said. "It (the market) will probably fall a bit towards the end of the year."

However, the Opec president said that he did not agree with predictions from Goldman Sachs, an investment bank, that the oil price could rise to $200 a barrel. He said that this was only likely if there was a major market crisis such as a halt in oil production in Iran. In that case, he added, prices could possibly surge to "200, 300, 400 dollars".

The Opec warning has been sounded despite attempts by western leaders including Gordon Brown to put pressure on Opec to increase oil production and reduce the oil price. The Prime Minister travelled to Jeddah, Saudi Arabia, last weekend to address an Opec conference.

Opec insist that the supply of oil is sufficient and that the oil price is being pushed higher by financial speculators. The predicted increase in the oil price will add to pressure on motorists who are already struggling to cope with record fuel prices.

A litre of unleaded petrol currently costs an average of £1.18. Every dollar increase in the price of oil adds about 0.42p to a litre of petrol. Therefore, petrol will cost about £1.24 a litre if the oil price is $150 a barrel. If the oil price is $170, it will cost about £1.32. Diesel already costs £1.32 so the anticipated increase could increase the cost to £1.47 a litre.

The average car's petrol tank holds 55 litres of fuel so the cost of filling the tank with petrol could rise to £72.60. Larger executive cars holding up to 70 litres of fuel could cost £85.80. Larger diesel cars could cost more than £100 to fill up.

The sharp rise in the oil price could begin next week. Mr Khelil said that, in the short term, "everything depends on the European Central Bank (ECB) and a decision it could take to raise eurozone interest rates."

"At that time, I think the price of oil will increase."

ECB policymakers are to meet July 3 when many analysts predict they will decide to raise their benchmark rate by a quarter of a point to 4.25 percent. Mr Khelil also cited "threats against Iran" as a possible cause of future oil price rises.

"If they (the threats) increase, I think the price of oil will rise further this summer as it would coincide with stronger demand for gasoline (petrol), particularly in the United States," he said.

http://www.telegraph.co.uk/money/main.j ... uel226.xml