Crisis to put 2p on petrol

A RISE of 2p a litre in the price of petrol looks inevitable as violence in the Middle East forces up the price of crude oil.

The AA warned today that petrol prices were bound to rise and with only a fortnight before the next Budget, urged Chancellor Gordon Brown to cut tax on fuel.

Rebecca Rees, the AA's spokeswoman for London, said: 'Oil prices are rising steeply on the markets and we know from experience that this will almost certainly translate into a rise in the price of petrol at the pumps. This is terrible news for motorists and as far as the AA is concerned Gordon Brown should take action to help them by reducing duty on fuel.'

Peter Regnier, of the fuel consultancy Oil Price Associates, warned: 'This fresh surge will cause a 2p a litre rise on the forecourts not long from now.'

Petrol has gone up by 4p a litre since the beginning of March and yesterday the price of North Sea Brent Crude oil rose by £1.46 per barrel to a high of $27.52 - approximately £19.30 - taking the overall increase to almost 50% since the start of the year.

BP said that any long-term increase in the price of crude oil would be likely to cause a rise in the price of petrol at the pumps, but claimed that the company had no immediate plans to increase prices.

The company said: 'We are not going to increase the cost of fuel for motorists with every fluctuation on the market, but if there is long-term increase then that is likely to have an impact.'

TotalFinaElf, the French oil giant, said its British retailers 'ought to be looking for another penny increase' in fuel prices on top of rises of 3p to 4p per litre during March.

'At the beginning of March our average price for unleaded petrol was 69.9p a litre; it's now 73.5p a litre,' it said.

Shares in airlines have been taking a hammering as dealers feared a rise in aviation fuel would make life even tougher for companies hit by a passenger slump since 11 September.

The price rises accelerated after two oil producing countries threatened to cut supplies to the West as Israeli forces attacked further into Palestinian-ruled territory.

Iraq has called on Arab neighbours to use oil as a weapon against Israel and the West with an embargo.

Iranian Foreign Minister Kamal Kharrazi implied that Iran might back Iraq's call if there was a consensus to do so among other Arab nations. He said: 'If they decide to use oil as a weapon, it would be very effective.'

THE oil price fell back from yesterday's six-month highs today following news of a surge in the level of crude stocks in the US, writes Jane Padgham.

The American Petroleum Institute said inventories were up by 6.5 million barrels last week, three times more than market the expected.

The news triggered heavy selling in overnight Asian markets, which extended into London trade. Brent crude futures fell 41 cents to $27.25 a barrel.

'This report is more bearish than most expected and should lead to some sort of pullback,' one oil trader said.