Another 1p on litre of petrol

MOTORISTS have been warned they face yet another surge in petrol prices as the Middle East crisis sent crude oil costs to a six-month high on Tuesday. Retailers predicted rises of at least 1p a litre in the coming weeks.

There has been speculation that Gordon Brown will increase VAT on fuel from the current 17.5% in his Budget on 17 April - leading to a possible combined rise of up to 3p a litre.

Petrol prices have already been creeping up in recent weeks. Pump prices have risen by about 5p a litre from around 68.9p a litre to 73.9p a litre.

Ray Holloway, a spokesman for the Petrol Retailers' Association, said part of the oil price hike was down to the markets catching up with Middle East tensions over the Easter break. 'Despite the problems, the oil companies will be reluctant to increase prices in the run-up to Gordon Brown's Budget,' he said.

'They won't want to irritate the Chancellor. They can bide their time for a fortnight. The rise in crude should, on its own, see an increase of about 1p a litre.

'But if the Chancellor does anything in the Budget that raises the price of petrol, you can expect the oil companies to capitalise on it. They've done it before. They can slide out their own increase under cover of the Chancellor. In the current market, motorists are the losers. The Chancellor and the oil companies are the winners.' He added that the Government would have problems when prices rise through the 'psychological barrier' of 80p a litre.

Oil prices jumped by more than $1.50 a barrel on Tuesday due to the effects of the Middle East crisis and a call by Iraq for an oil embargo against the US

Baghdad said oil should be used to put pressure on the US to force Israel out of Palestinian areas. The proposal revived memories of the 1973 oil embargo - but the world's biggest oil exporter, Saudi Arabia, dismissed the possibility of a repeat.

International benchmark Brent crude oil was trading $1.46 higher at $27.38 a barrel, after earlier shooting to $27.52 - its highest level since 19 September last year, when the world was reeling from the terrorist atrocities in New York and Washington. US light crude also soared, gaining 92 cents to finish at $27.80. By early afternoon, oil due for delivery in May was $26.60 a barrel on London's International Petroleum Exchange - a six-month high - and catching up with price rises on overseas markets.

Tom Hougaard, a trader at Financial Spreads, said: 'There is a lot of uncertainty, oil is going up and gold is also going up. At times of uncertainty, the gold price rises.'