Petrol could leap 20p a gallon

MOTORISTS face a leap in petrol prices of 20p a gallon by Easter because of fears of a war with Iraq. The first increases took effect on Tuesday amid warnings of a repeat of the fuel protests which brought parts of Britain to a standstill in 2000.

A 20p rise would add some £200m a year to the nation's annual petrol bill. It would cost the average Mondeo driver an extra £53. There were predictions that prices could rise by a further 25p after Easter, resulting in a total increase of 45p by the end of the year.

The key factors are President Bush's warnings of a US-led move against rogue states, coupled with a squeeze on supplies by the Organisation of Petroleum Exporting Countries (Opec), which threatens to create a world shortage.

Crude oil prices jumped to just over $24 a barrel on Monday - the highest since the 11 September terror attacks on the US. Esso swiftly took the opportunity to push up prices on unleaded by between 1p and 2p a litre - 4.5p and 10p a gallon - at hundreds of outlets. Shell, Total, Tesco and Sainsbury's all announced a rise of 4.5p a gallon, while it emerged that BP has brought in a 10p rise over the last week.

The increases took the typical price of unleaded to around 71.5p a litre - £3.25 a gallon - although many motorists are already paying more than 75p, or £3.40.

The Petrol Retailers' Association warned that further rises are in the pipeline and that a total rise this year of 45p a gallon cannot be ruled out. Its director Ray Holloway blamed Opec's drastic cutback in production from January. He said: 'If the price of crude oil stays as it is now, you could see further price increases of around 10p a gallon before Easter. Iraq is another threat for the future. If President Bush does start bombing we are looking at a much blacker picture. That would have a very sudden impact. The price would shoot up sharply and you could be looking at $30 a barrel. We could see prices back up over 80p a litre, which is where we were during the fuel protests of 2000.'

The surge in prices will infuriate consumers who feel that the petrol companies are too quick to increase charges. It appears to follow a pattern of rises shortly before holiday periods, where families take to the roads in their millions.

Edmund King, executive director of the RAC Foundation, warned that further rises could bring a return of fuel protests. And the AA warned the Government that motorists would not stand for any increase in fuel duty in Gordon Brown's Budget next month. It pointed out that the Government is mainly responsible for Britain's high fuel bills, because tax accounts for 80% of the price of a gallon.

There are fears that higher fuel costs will damage the fledgling economic recovery in North America and lead to higher inflation in Britain and elsewhere.

The petrol companies were quick to insist that the price hike had been forced on them. They claimed the sale of fuel in Britain generates tiny profits and often falls into loss. Tesco said the 'dramatic' hikes in world oil prices over the last two weeks had made the change necessary.

But the other side of the equation is that every tiny increase in crude prices boosts the profits of the companies' production operations by tens of millions of pounds.

A price rise of around 4p a litre or 20p a gallon would push up annual motoring costs for the driver of a Mondeo or Vauxhall Vectra to £982. That is based on a litre price of 73.5p(£3.34 a gallon) and travelling 10,000 miles.

City analysts said further price rises are not inevitable. Jeremy Batstone, head of research at Natwest Stockbrokers, said the price of oil per barrel had been driven up by fears of an attack on Iraq, which could result in Iraqi oil coming off the market. 'The markets are fearful about a war,' he said. 'But I think it is jaw, jaw and not war, war at the moment - and, on that basis, I think it is not inconceivable that the oil price might fall back.'

The threat to the West's fuel supplies