Turmoil in the international oil markets, due to strong demand, geopolitical instability and a shortage of refining capacity, will put further upward pressure on forecourt prices. Huge profits are expected for oil companies such as BP and Shell, which report their half-yearly financial results next week. ExxonMobil, which also reports next week, has just become the world's first company to be valued on a stock exchange at over half a trillion dollars (£250bn).
Petrol hits £1 a litre with no end in sight to turmoil in the world's oil market
The average price for unleaded petrol across the country is 96.75p, some way below the average 98.4p record high it reached in August 2006, according to Catalist, the monitoring specialist that provides information to the major oil companies. But some garages are already charging their customers 108p for unleaded fuel and as much as 109p for diesel. "Who knows where it is going to go from here?" said Arthur Renshaw, who covers the UK market for Catalist.
The rise in fuel costs comes only a week after Asda tried to steal a march on its rival supermarkets by dropping its forecourt prices to 93.5p for unleaded petrol. Some competitors responded by cutting their prices but gradually the pressure has built and the upward momentum has been restored.
US crude oil surged again yesterday by 91 cents to $75.06 a barrel in trading on the New York Mercantile Exchange while the North Sea benchmark oil, Brent blend, was being valued at $76.45 - barely $2 short of its highest ever level.
At the heart of the boom has been very strong demand growth as the US economy continues to perform more strongly than expected and China and India continue to surge ahead.
Global demand for energy from all sources is expected to increase over the next decade by around 1.5% to 2.5%. Meanwhile supply is being held back by a number of factors - not least the policies of the OPEC oil cartel, which restricts production levels of its member countries in order to maintain price levels. Less than a decade ago it was trying to keep prices at around $22 to $28 a barrel but last year began to talk about $45 and now says it is aiming at ensuring they do not drop below $55.
Many Opec nations are almost completely dependent on oil to develop their economies and - arguably - to maintain their social spending and keep their governments in power. Non-Opec output meanwhile has been constrained by factors such as political instability or concerns about producer countries reconciling increased carbon output with their climate-change targets.
Continuing conflict
Violence in Iraq and Nigeria and the rising tide of resource nationalism from Russia to Venezuela has disrupted oil and gas output while new developments have been slowed by rising costs.
Recent presidential elections had led to a lull in the virtual civil war raging in the Niger Delta that had halted some of Shell's key producing fields, but the calm was broken by the kidnap of a three-year-old girl, the daughter of a British oil worker, and the seizure of five staff by militants.
Continuing conflict in Iraq has also reduced output while the stand-off between the US and another major Opec producer, Iran, over the latter's nuclear programme has raised fears of supply disruption and fed into rises in the crude price.
Refining capacity has also failed to keep pace with the growth in oil demand and key US refineries have been out of action in recent weeks amid breakdowns that some attribute to them being run too hard.
BP's Whiting and Texas City plants have been partly incapacitated by the need for repairs. This has taken 400,000 barrels a day of refining capacity out of the system - 2% to 3% of the US's total.
Slowed programmes
Repair and maintenance programmes have also been slowed down across the industry by the need for more rigour in the aftermath of the Texas City fatalities and a shortage of equipment and skilled personnel. Massive investment in Canada's oil sands business is blamed by some for soaking up oil workers from all over North America while tougher new environmental regulations have increased the sophistication of US refineries and the time needed to look after them.
Opec has become alarmed by the western drive to produce plant-based fuels and the introduction of regulations to ensure biofuels are mixed with carbon fuels to produce cleaner power, though the IEA argued in a report last week that by 2015 biofuels were unlikely to account for more than 3m barrels of global supply compared with 40m from Opec.
The major oil companies are rushing to get into the biofuels sector but they will continue to make the vast bulk of their profits from selling carbon-based products.
Exxon is expected next week to report the highest ever quarterly profits of any company at nearly $11bn, putting it on track to make $42bn by year end, but will argue it makes next to nothing from petrol in Britain, with most of the £1 a litre going in tax.
Via: The Guardian
by Terry Macalister
