Petrol rise looms as cost of crude hits record high

Drivers are today facing the prospect of higher prices on the forecourt after oil prices surged to record levels.

With prices for crude oil in world markets at unprecedented highs, the cost of petrol is likely to follow soon as existing stocks of cheaper fuel begin to run out.

The price of petrol at pumps in London is currently about 85p a litre, but a likely rise in costs could push prices towards the £1 a litre seen in some central London garages last month, making the £50 refuelling stop commonplace.

The rising costs of fuel is also putting pressure on the Government to abandon a planned increase in petrol duty. In March it unveiled plans to put 1.4p a litre duty on petrol this month, a plan it later postponed after angry protests from motorists.

It had been thought the Treasury would look to reinstate the tax at the pre-Budget report in two months, but after the country was brought to a virtual standstill by fuel strikes in 2000, the Treasury is loath to generate public anger over motoring costs in the probable run-up to an election.

The latest price rise in oil, taking the price of benchmark US light crude over $50, comes amid fears that the world is running short. Production has been hit by a series of hurricanes in the Gulf of Mexico over the past month and by clashes between government forces and rebels in the main oil producing region of Nigeria.

North Sea oil also rose, with Brent crude hitting a record $45.63, or £25 a barrel.

With American production briefly forced to shut completely after Hurricane Ivan and US reserves at their lowest since 1975, American petrol companies are buying on the world market as local supplies dry up.

The situation has been made worse by the fighting in Nigeria, Africa's leading oil producer, which has forced cuts in production of about 250,000 barrels a day. The markets have also been unnerved by gun battles in Saudi Arabia between government troops and suspected al Qaeda militants.

Analysts expect prices to continue to rise in the short term, with world production almost at its limit.

Demand from growing economies such as China means oil consumption is at its highest since the Seventies.

Members of OPEC say they are already pumping at nearly full capacity, but insist that the problem is a short-term one.