The Independent: Petrol prices set to rise as crude holds at $50 a barrel: “Crude oil prices have surged following hurricane damage to Gulf of Mexico supplies, uncertainty over the Russian oil giant Yukos, violence near Shell's Nigerian sites and tensions in the Middle East. Some analysts say crude prices could reach $60 before coming down.” (ShellNews.net)

Julia Kollewe

Sep 29, 2004

DRIVERS IN Britain are facing further increases in petrol prices after crude oil prices reached all-time highs, surging past $50 a barrel.

The Petrol Retailers' Association expects the cost of unleaded petrol to rise by 1p to 2p a litre, from an average of 81.8p yesterday, adding it could just be a blip. Diesel customers are set to be harder hit with an extra 1p to 2p a litre, from an average of 83.9p yesterday, with further increases likely to follow.

Crude oil prices have surged following hurricane damage to Gulf of Mexico supplies, uncertainty over the Russian oil giant Yukos, violence near Shell's Nigerian sites and tensions in the Middle East. Some analysts say crude prices could reach $60 before coming down.

"The increase in petrol prices will be short-lived," Ray Holloway, at the Petrol Retailers' Association, said. "We're still looking at worldwide supply outstripping demand. Speculators are making a lot of money out of the oil market. When they get out, the price will fall.''

Tesco has raised some of its petrol prices but added that prices are not going up across the board. Bert Morris, the deputy director of the Automobile Association, said how high petrol prices go would depend on the "fierce competition" between retailers, especially supermarkets. "But if we see a sustained increase in barrel prices, we will see a sustained increase at the pumps," he said.

Saudi Arabia, the world's largest oil exporter, responded to the surge in prices yesterday by announcing it is boosting its official production capacity by 500,000 barrels per day to 11 million. The new capacity is not expected to have an immediate impact on production as Saudi Arabia has already said it will meet demand for 9.5 million bpd this month and next.

Shell shut its Santa Barbara oil-pumping station in Nigeria yesterday and evacuated 235 "non-essential" staff from two oil fields at Soku and Ekulama after rebels announced an offensive against government troops. But Shell said it will continue oil operations in Nigeria's delta, where militants told companies to shut down and advised foreigners to leave by 1 October.

Julian Lee, at the Centre for Global Energy Studies, said: "If we get a substantial disruption to Nigerian supplies, oil prices could go up to $55 or $60." He added: "We may then see some oil released from strategic stocks around the world" in an attempt to bring the price down to between $40 and $45.

Eric Chaney, at Morgan Stanley, said "Things are turning vicious right now", adding that the situation in Nigeria showed there was an incentive to use oil as a kind of weapon in the bargaining process.