Petrol will rise 10p a gallon
PETROL prices will rise by 10p a gallon within a fortnight as oil producers cut supplies to the West, it has emerged. The increase - equivalent to around 2p a litre - will follow a drop in production of 1.5m barrels a day which is set to be announced today.
The move to boost profits by the petroleum-rich Arab nations will drive up the price of crude oil which will then hit prices at the pumps. Forecourt prices are expected to increase from around 69p per litre (£3.14 a gallon) to about 71p a litre (£3.24 a gallon). Oil supplies will be cut from 1 January and the reduction could last for more than six months.
News of the move, which ends an international price war, made oil prices leap through the psychological $20 a barrel barrier after falling to less than $18 a barrel after the 11 September attacks. Shares in BP and Shell also rose as dealers predicted they would reap higher profits.
Ray Holloway, of the Petrol Retailers Association said: 'Cutting back on oil production makes the markets jump, so prices go up. It is a very volatile situation. We are probably looking at a rise of around 1p to 2p a litre at the pumps. It is likely to hit at the end of the first week in January. Supermarkets have led the push for low prices but they may be forced to raise their prices if they have to pay more for their fuel.'
He said pump prices in many areas were around 69p per litre, dropping to as low as 67p in some. However, motorists in outlying areas, including the Highlands and Islands of Scotland, are paying much more already.
Arab countries in Opec (Organisation of Petroleum Exporting Countries) meet today in Cairo and their supply cuts are expected to be followed by non-members such as Russia, Norway, Mexico, Angola and Oman.
Holloway added: 'Much depends on whether the countries can keep to their agreement to restrict supply. If someone breaks ranks, then the price will fall again. These are not normal times. The effect of the recession, World Trade Centre attack and the war in Afghanistan have made the markets very jittery.'
Garry Russell, co-ordinator of the Dump the Pump campaign which helped to spark last year's petrol protests, warned that prices could rise to 80p per litre in the next six months. He said: 'It's in the major oil producing countries' interest to restrict the flow of their product and I'm sure prices will go back up again.'
A spokesman for Safeway said: 'If there is a sustained increase, there may be a need for us to increase our prices.' Sainsbury's said it will try to keep prices 'as low as possible as long as possible' but Opec's move may have an effect.
At the height of last year's petrol price protests, unleaded was more than 80p a litre, or £3.64 a gallon, with 80p in every pound going to the Treasury. The demonstrations erupted again in June during the General Election campaign.
