Higher petrol prices in pipeline

MOTORISTS were today warned to expect another penny on petrol prices over the next month as fuel companies pass on the impact of sky-high oil costs.

Ray Holloway of the Petrol Retailers Association said petrol had already risen by around 2p a litre over the last 10 days to an average of 81.7p per litre.

This will probably move higher in August as oil prices hit fresh highs today after a stoppage of Iraqi crude production increased fears that tightly stretched global supply would be inadequate at times of disruption.

US crude rose to $44.99 a barrel, the highest since the contract was first traded on the New York Mercantile Exchange 21 years ago. London's Brent crude dipped 19 cents to $41.37 compared with yesterday's record peak of $41.70.

It is the eighth trading day in a row that oil has sailed to all-time highs and comes as Federal Reserve policymakers prepare to set US interest rates tonight.

The Fed's Open Market Committee is widely tipped to lift the Fed funds rate by a quarter point to 1.5% despite last week's dismal employment news and concerns that sky-high oil prices could stifle economic growth.

Iraq shut its southern oilfields that pump crude to the key Basra oil terminal following threats of sabotage by Shi'ite Muslim militia. The closure is the first significant shutdown of Iraq's main southern oil sector since the handover of power to its interim government on 28 June.

Analysts said oil prices could continue rising. 'If we continue to have a tight supply/demand balance and we see US stocks draw down as we go into the winter, we may see $50 oil,' said Tony Nunan, manager at Mitsubishi Corporation's international petroleum business.

Although a rise in US interest rates is seen as a shoo-in, signs the recovery may be running out of steam has fuelled speculation that the Fed may hold borrowing costs steady at its meeting on 21 September.