UK petrol prices rise

Petrol prices across the UK are set to rise by one penny a litre.

The oil companies Shell and Esso and the Tesco and Sainsbury's supermarket chains have all said that they will put up prices.

The move comes as increased tension in the Middle East has pushed the cost of oil higher, raising fears that higher fuel costs could be on the way.

This change will be phased in over the next two or three days, and affects several hundred sites

Shell spokeswoman

The minimum recommended price of a litre of unleaded petrol from Shell pumps will rise to 70.9p, Tesco's 300 stations will charge 70.7p, while Sainsbury's average price will rise to 70.6p.

Esso said it had increased the price of its petrol by between 1p and 2p per litre at its stations over the past 24 hours, taking the cost of a litre to between 70.9p and 71.9p.

Oil price puts pressure on retailers

The price of oil has surged in recent days following fears of US military action against Iraq.

The oil price rose at first on Tuesday but then fell back, and by 1800 GMT the benchmark crude oil price - Brent crude for April delivery - was down 29 cents at $23.60 a barrel.

Tesco blamed the recent "dramatic" increases in prices for its move, but stressed that the price increases would only apply to unleaded petrol.

The rises in crude prices have been difficult to absorb in a market where - because of tough competition - forecourts are able to impose only small mark-ups on fuel, a Shell spokeswoman said.

"(The) change will be phased in over the next two or three days, and affects several hundred sites," the spokeswoman added.

Tax take

The firms' statements were backed by motoring organisation the Automobile Association, which said the price of UK petrol was still low by recent historical standards.

However the AA renewed calls for the government to reduce petrol duties which account for about three quarters of the pump price of unleaded petrol.

"Before tax UK petrol prices are the lowest in Europe," AA policy spokesman Richard Freeman said.

"After tax they are among the most expensive."

Conflict fears

While oil prices fell last year, undermined by poor demand amid the world economic slowdown, hopes that the US recession has ended have raised expectations of a surge in consumption.

The ongoing conflict between Israelis and Palestinians, and concerns over US action against Iraq, have further affected the market.

Jeremy Batstone, head of research at Natwest Stockbrokers, said: "The fact is it's really related to US policy towards Iraq."

OPEC, the Organisation of the Petroleum Exporting Countries, is to meet in Vienna on Friday.

BBC economics correspondent Andrew Walker told the BBC's World Business Report he believes OPEC would like to see oil prices sustained at this relatively high level before production is increased.