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Oil price rockets to $135 a barrel
Thursday, 22 May 2008
Oil prices have risen by around 400% during the past seven years and by 40% in 2008 alone and analysts have warned that the price may rise as high as $200 per barrel by the end of the year which will push up the cost of living.
Fuel costs here are now expected to soar again with predictions that petrol and diesel will hit the £1.50 a litre mark this year now looking ever more likely.
The AA has reported the highest monthly rise in average diesel prices this century — up by 6.76p to 124.17p a litre. Petrol also leapt 4.49p to 112.55p a litre in the month to mid-May.
The latest increases are the latest blow for beleaguered local consumers already reeling from a series of price rises which put a squeeze on the household budgets. The prices of gas and home heating oil have risen steeply with electricity prices expected to follow shortly.
Fuel price increases will also have a knock-on effect across the retail sectors with increases in transport costs forcing consumers to pay more for everyday food products in the supermarket.
Analysts today predicted that local fuel price increases may be imminent.
Andrew Howard, head of current affairs at the AA said: "I think it's very hard not to see more price rises. Some people are suggesting oil may continue to rise for the next eight years and if the world price is being driven up, obviously prices are going to go up at the pumps."
Mr Howard said the weak dollar, an increase in oil speculators and a rise in the number of diesel vehicles on the roads were behind the recent rapid price hikes.
Added Mr Howard: "Normally these increases in oil prices can take four or six weeks to work their way through but it is difficult to say that they won't come in quicker.
"One of the big difficulties we have been experiencing is that, all of a sudden, it has become a speculators market — you have people who had been investing in the sub prime market now putting their money into oil."
"So you have people who are buying oil to make money as well as people who are buying oil to fill their cars £ and we all know there isn't enough oil. This entirely new speculative market is beginning to rattle its way around the world. And that is particularly disquieting."
Mr Howard said the forthcoming bank holiday will indicate how the recent price hikes and the prospect of more have affected consumers generally.
He said: "If you have to drive everyday to get to work then you have no option but to pay for it. If you live in a small country town then you can't change your mind and say 'I'm not paying it', but that money has to be made up elsewhere. And when you add on the rises to increased mortgage costs, higher food prices things like holidays and leisure motoring are going to take a hit — the high street downturn."
Strong demand from developing countries such as China and a weak US dollar have helped to push up prices.
Demand for oil has also been affected by international unrest, which has sparked concern among investors.
For example, in early May the market was hit by fears over clashes between Turkish forces and Kurdish rebels in Iaq. And the president of Indonesia said he was considering quitting OPEC because his country was no longer a net oil exporter.
"Our wells are drying," he said in a televised speech.
Independent charity the RAC Foundation said the Government could use flexible fuel tax to smooth out the effects of varying crude oil prices.
Goldman Sachs is advising clients — including airlines and hauliers — to buy oil supplies for delivery as far as eight years ahead. The investment bank predicts oil prices could 'super-spike' to $200 per barrel in the next two years.
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