The Independent: Petrol giants prepare for the £1 litre: “Petrol prices in the UK have risen sharply over the past week, moving above 90p a litre for the first time, amid concerns that European supplies will be diverted to the United States in the wake of Hurricane Katrina. The storm caused serious damage to a number of crucial petrol refineries in the Gulf of Mexico.”: Posted Sunday 16 October 2005

By David Prosser

Published: 15 October 2005

Britain's biggest petrol retailers have begun preparing for the price of fuel to break through the 100p-a-litre barrier, it emerged yesterday. BP said it had already started to convert price displays and signs in its petrol stations to cope with higher prices - in many garages, petrol pumps and forecourt signs cannot currently display prices of more than 99.9p. Shell said it was examining a number of solutions to the same problem.

Petrol prices in the UK have risen sharply over the past week, moving above 90p a litre for the first time, amid concerns that European supplies will be diverted to the United States in the wake of Hurricane Katrina. The storm caused serious damage to a number of crucial petrol refineries in the Gulf of Mexico.

However, even before the devastating storm in the US, petrol prices had been rising much faster than expected, because of a rapid rise in oil prices. The cost of crude oil rose from $41 a barrel to $67 a barrel over the year to 1 September. As a result, the price of unleaded refinery petrol rose from $408 a tonne to $857 over the same period. The increase equates to a 19p increase in the cost of a litre of fuel on petrol forecourts.

Oil prices actually fell on Friday, after the International Energy Agency said its 26 member countries would make available 2 million barrels a day from their reserves to help the US in the wake of the hurricane. However, the price remained above $67 a barrel, more than a third higher than a year ago.

Privately, most petrol companies concede that the prospect of British motorists being asked to pay 100p or more for a litre of petrol is now inevitable. Wholesale petrol suppliers raised their prices last week and warned retailers to expect further increases in the coming weeks and months.

A spokeswoman for BP said: "We are having to make some adjustments to our petrol station pole signs and to some of our pump machines on forecourts. Prices have gone up dramatically over the past 12 months, and much faster than we anticipated."

A spokeswoman for Shell said: "We are looking at a number of solutions for displaying petrol prices of 100p a litre and above, if and when it happens."

On Friday, BP's average price for a litre of petrol was 94.7p, compared with 82p a litre only a year ago. Shell said its average price was between 94p and 95p. The two companies own and run about a quarter of the 10,000 petrol stations in Britain.

Last night, a senior figure at the International Monetary Fund warned that rising fuel costs now represented an increasing risk to the stability of the global economy. The IMF, which is this month due to give its forecasts for global economic growth, said that while it still expected the world's economy to expand by more than 4 per cent in both 2005 and 2006, the danger of a slowdown was increasing.

"The world is more resilient than in previous moments to quite a rapid increase in oil prices," Rodrigo de Rato, the IMF's managing director, said. "Nevertheless, oil prices have become one of the clear risks to the world economy, along with global imbalance - the risk is not decreasing, but is increasing."

Rising petrol prices could also represent a political threat to the Government. Fuel costs are now a fifth higher than when road hauliers and farmers brought Britain to a standstill in 2000, in protests over taxes on petrol and diesel. Figures from the RAC suggest the average family is now spending an extra £23 a month on petrol costs.

Britain's biggest petrol retailers have begun preparing for the price of fuel to break through the 100p-a-litre barrier, it emerged yesterday. BP said it had already started to convert price displays and signs in its petrol stations to cope with higher prices - in many garages, petrol pumps and forecourt signs cannot currently display prices of more than 99.9p. Shell said it was examining a number of solutions to the same problem.

Petrol prices in the UK have risen sharply over the past week, moving above 90p a litre for the first time, amid concerns that European supplies will be diverted to the United States in the wake of Hurricane Katrina. The storm caused serious damage to a number of crucial petrol refineries in the Gulf of Mexico.

However, even before the devastating storm in the US, petrol prices had been rising much faster than expected, because of a rapid rise in oil prices. The cost of crude oil rose from $41 a barrel to $67 a barrel over the year to 1 September. As a result, the price of unleaded refinery petrol rose from $408 a tonne to $857 over the same period. The increase equates to a 19p increase in the cost of a litre of fuel on petrol forecourts.

Oil prices actually fell on Friday, after the International Energy Agency said its 26 member countries would make available 2 million barrels a day from their reserves to help the US in the wake of the hurricane. However, the price remained above $67 a barrel, more than a third higher than a year ago.

Privately, most petrol companies concede that the prospect of British motorists being asked to pay 100p or more for a litre of petrol is now inevitable. Wholesale petrol suppliers raised their prices last week and warned retailers to expect further increases in the coming weeks and months.

A spokeswoman for BP said: "We are having to make some adjustments to our petrol station pole signs and to some of our pump machines on forecourts. Prices have gone up dramatically over the past 12 months, and much faster than we anticipated."

A spokeswoman for Shell said: "We are looking at a number of solutions for displaying petrol prices of 100p a litre and above, if and when it happens."

On Friday, BP's average price for a litre of petrol was 94.7p, compared with 82p a litre only a year ago. Shell said its average price was between 94p and 95p. The two companies own and run about a quarter of the 10,000 petrol stations in Britain.

Last night, a senior figure at the International Monetary Fund warned that rising fuel costs now represented an increasing risk to the stability of the global economy. The IMF, which is this month due to give its forecasts for global economic growth, said that while it still expected the world's economy to expand by more than 4 per cent in both 2005 and 2006, the danger of a slowdown was increasing.

"The world is more resilient than in previous moments to quite a rapid increase in oil prices," Rodrigo de Rato, the IMF's managing director, said. "Nevertheless, oil prices have become one of the clear risks to the world economy, along with global imbalance - the risk is not decreasing, but is increasing."

Rising petrol prices could also represent a political threat to the Government. Fuel costs are now a fifth higher than when road hauliers and farmers brought Britain to a standstill in 2000, in protests over taxes on petrol and diesel. Figures from the RAC suggest the average family is now spending an extra £23 a month on petrol costs.

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