The Times: Drivers face £4 gallon as oil cost soars: “Shell admitted for the first time since crude oil began its latest surge that petrol prices were heading higher.” (ShellNews.net)
By Lea Paterson and Gabriel Rozenberg
August 21, 2004
Pump prices rise overnight and more increases are on the way
MOTORISTS are facing the threat of paying £4 a gallon as fuel retailers began to push up petrol prices across the country last night.
Prices in some areas rose by almost 3p a gallon overnight on the back of record crude oil costs, with further increases all but certain. Total, which increased prices for petrol and diesel by 0.6p a litre, was the first chain to confirm a jump in forecourt prices as crude oil approached $50 a barrel. Others are poised to follow suit.
The prospect of sharp rises will put intense pressure on Gordon Brown, who has already had to delay his plans to increase fuel duty. The Treasury had intended to increase its 47.1p per litre duty by 1.9p, or 2.2p including VAT, on September 1. Last month it deferred any decision until the Pre-Budget Report, expected in November.
Shell increased its average price from 81.2p per litre on Wednesday to 81.26p last night. Similar fractional increases have been reported at local Sainsbury’s, Texaco and Jet filling stations. Last night these fuel companies were alerting motorists that the increases were only the beginning. With oil analysts convinced that oil will exceed $50 a barrel next week, petrol companies say that they can carry on absorbing higher costs for only so long.
A ChevronTexaco spokesman said: “There may be some increases locally. Obviously the increased pricing (of crude oil) is putting quite significant pressure on our margins.”
Shell admitted for the first time since crude oil began its latest surge that petrol prices were heading higher. “The cost of crude is at a record level and that inevitably feeds though to the pump price at the end,” a spokesman said.
Sainsbury’s also gave warning of price pressures. “The overall average price is stable, but there is a cost price increase,” a spokesman said. “So there is a cost pressure which we are absorbing.”
BP said its price, of 82.7p for a litre of unleaded petrol, had not changed in two weeks but was being monitored daily.
At 81.7p a litre — the current average — motorists are paying £3.71 for a gallon of unleaded fuel. Industry estimates suggest that the oil price rise over the past seven days will add at least 2p a litre to fuel in coming weeks. This would take petrol prices up to the 84p a litre level that triggered the fuel protests in 2000.
Increases above 84p a litre appear all but certain if oil prices push substantially above $50 a barrel. A rise to 88p a litre would take the price of a gallon of petrol to £4.
Rebecca Rees, for the AA, said: “Analysts are predicting that it (the petrol price) could hit £4 a gallon or 88p a litre and we have no reason to dispute that.”
Estimates suggest that every 5 per cent rise in the oil price brings in around £200 million of additional revenue for the Treasury, meaning that the Chancellor stands to make a healthy windfall even if he scraps his plans to increase duty.
The Institute for Fiscal Studies said: “Given the Treasury’s estimates of the revenue effects of oil prices, there may be about £1 billion of extra revenue this year and £600 million a year thereafter.”
If the oil price remains high, and the Chancellor increases the duty, he will face the threat of a rerun of the 2000 fuel protests. Clive Hoyland, a haulage company director who helped to organise rolling blockades on motorways during the protests, said the Government had done nothing to address concerns. He said: “If the Government puts the duty up there would be fuel protests again, I’m quite sure about that.”
The price of US crude oil stormed past $49 for the first time yesterday. Analysts predicted that it would top $50 a barrel next week, with increasing tensions in Iraq acting as the catalyst.
Rises have also been fed by global economic growth, with demand in China showing no signs of easing. Chinese crude imports for July jumped 41 per cent, with imports for the year to the end of July up 40 per cent, figures showed yesterday. The battle by Yukos, the Russian oil giant, against bankruptcy has also helped to stoke oil prices.