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Last Updated: Thursday, 23 June, 2005, 17:23 GMT 18:23 UK
Diesel 'could breach 1 a litre'
Driver filling up car with petrol
Fuel prices will not ease up until winter, experts have warned
The cost of diesel could breach the 1 a litre level this year, the Petrol Retailers Association has warned.

The warning came as it said petrol prices were set to rise by 2p within days, pushing unleaded to a new record 87p a litre on average.

Record crude prices near $60-a-barrel and a lack of refinery capacity were to blame for the increase, the group said.

Meanwhile, the AA Motoring Trust said prices were already at a peak of 86.21p for unleaded and 90.34p for diesel.

The AA added that with unleaded petrol costing on average 79.6p a litre in January, private motorists were now paying 94.69 per month on fuel against 87.43 at the start of the year.

The surge means that, on average, UK motorists were now collectively spending an extra 4.83m a day on petrol compared with January, the AA said.

Diesel pressure

However, there was a glimmer of hope, with Ray Holloway from the Petrol Retailers Association saying that petrol prices were likely to slip in the autumn.

"But diesel I'm afraid might do the opposite," he told BBC News.

He explained that refineries were unable to keep up with increasing demand for the fuel as they were built in the 1970s to supply a market that is now "totally different to today".

"Upgrading a refinery is a long term project so we need to catch up," Mr Holloway added.

Furthermore, supplies will be squeezed further in the winter as diesel is used as a heating fuel, he added.

The problem is not just one the UK is facing - on Tuesday the UK-based group Oil Price Assessments Limited (OPAL) said prices had hit record highs in five European countries and neared peak levels in several others.

Price squeeze

The retail fuel analyst body said prices at the petrol pump in Germany, Spain, Belgium, France and Portugal were at record highs.

Belgians were paying the most for unleaded, forking out 1.259 euros(83.45p) a litre, while at 1.092 euros (72.36p) a litre Germans were paying the most for diesel.

While prices across Europe were racing higher, OPAL analyst Jose Blanco warned that motorists in the UK will face further increases.

"I think UK prices still have to go higher because the (retail) margin is very low," he told Reuters

OPAL estimates that to cover operating costs UK gross petrol margins need to be placed at around the 6p a litre level - the group estimates they are currently around 4.3p.

"If you look at those margins, prices either have to go up or oil comes down in price," Mr Blanco said.

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