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Last Updated: Friday, 2 September 2005, 17:28 GMT 18:28 UK
UK motorists feel Katrina price pinch
By Jon Cronin
BBC News business reporter

Motorist at a London petrol station
UK motorists have seen the cost of petrol soar in recent months

As the destruction wrought by Hurricane Katrina continues to send shockwaves through world oil markets, fears over supply problems and high fuel prices in the US are being felt on the other side of the Atlantic.

Motorists in the UK are facing a spike in already high petrol prices, experts have warned.

The damage caused by Katrina to oil operations in the Gulf of Mexico and refineries in southern US states has raised concerns over petrol shortages in the US.

And while many US motorists are having to cope with gasoline prices at a record $3 a gallon, their counterparts in the UK are also facing higher costs.

Petrol prices at forecourts across Britain have already reached new highs, rising above 90p a litre for the first time in August.

Londoners share their views on feared petrol price rises

At a handful of forecourts in London and in more remote parts of Scotland petrol prices have already hit 1 a litre.

The soaring cost of oil - which hit a record $70.85 a barrel earlier this week - and security fears in the Middle East are mostly to blame for high petrol prices.

But analysts say the current crisis in the US is adding further pressure to petrol pump prices in the UK.

The average price of a litre of unleaded petrol in the UK was 92.3p on Thursday, according to Akber Ali of research group Catalist.

Mr Ali said the daily rate of increase in average prices had jumped in the days since Hurricane Katrina swept across the US Gulf coast.

On Thursday 1 September, the same day that President George W Bush urged Americans to conserve fuel stocks, average petrol prices were at their highest in the south west of England - at 92.74p a litre - according to Bristol-based Catalist.

"My local Esso petrol station, which had been quite competitive, went up by more than 2 pence overnight on Wednesday to 92.5 pence," Mr Akber said.

Yorkshire and Humberside had the cheapest average petrol price at 91.9p. Prices for the day stood at 92.3p in Scotland, 92.63p in Wales and 92.7p in Northern Ireland.

In London, the average price stood at 91.97p.

Separate figures from Catalist showed that prices at petrol stations owned and run by Shell were the cheapest of the big operators - at 91p a litre - while BP was the most expensive at 93p.

Of the major supermarkets, Catalist said prices on Thursday at Asda were cheapest at 89.5p a litre, while Morrisons was the most expensive at 90.8p.

The high price of petrol has already had a knock-on effect for the wider UK economy.

Consumer price inflation rose to 2.3% in July from 2% the previous month - mainly because of rising transport prices - the Office for National Statistics reported last month.

But while the rising cost of petrol has hit the pockets of many, Ray Holloway, director of the Petrol Retailers Association, said consumers were increasingly coming to terms with the high cost of motoring.

'Bad reflection'

"People do understand that worldwide oil events are driving the price higher," he said.

South west England: 92.74p
Northern Ireland: 92.7p
Wales: 92.63p
East Anglia: 92.47p
South east England: 92.45p
West Midlands: 92.34p
Scotland: 92.3p
East Midlands: 92.23p
North east England: 92.12p
London: 91.97p
North west England: 91.92p
Yorkshire/Humberside: 91.9p

Source: Catalist

"In our UK forecourts in the coming week we are going to see increases of 3p or 4p a litre. That's unavoidable because of what has happened in the US.

"We are seeing a very nervous oil industry respond to a contained and limited oil crisis in the US. The worst will be short-lived, both in the US and the UK. It's a bad reflection of an otherwise efficient industry."

While Mr Holloway predicted that Hurricane Katrina would cause only a temporary spike in current UK petrol prices, he warned the overall trend for higher costs at the pump would inevitably continue.

"We have to accept that the days of 80p a litre are behind us," he said.

Failing forecourts

And while motorists are feeling the pinch, Mr Holloway said the high cost of petrol was causing even more pain for petrol retailers.

"The number of our forecourts that are still trading is contracting each year. Small retailers are squeezed when the price goes up," he said.

Currently, independent retailers make about 2.5p on every litre of petrol sold - which has to cover all of the business' costs, the Petrol Retailers Association said.

It predicts that by the end of the year, the number of petrol stations across the country will drop below 10,000, from a high of 39,000 in the early seventies.

Some 400 stations have already closed in the first six months of 2005, the association said, on top of 600 closures last year.

"If you aren't selling much petrol, it doesn't take long to work out the economics," Mr Holloway said.

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