Page last updated at 12:21 GMT, Tuesday, 16 March 2010

Petrol prices set for record high, says AA

Petrol pump
Petrol currently costs 1.15 a litre on average

UK petrol prices could hit a record average high of £1.20 a litre in the next few weeks, according to the AA.

Increases in the wholesale price of petrol since January are to blame for the rise in forecourt prices, the motoring organisation said.

It urged the Chancellor, Alistair Darling, to postpone the introduction of a planned 3p rise in petrol duty due to come in on 1 April.

The average UK price of unleaded petrol is currently just over £1.16 a litre.

The previous record UK average high for unleaded was 119.7p in July 2008, when global crude oil prices were also at an all-time high.

Regional variations

However, some petrol stations in central London - which the AA says typically have the highest petrol prices in the UK due to their limited number - are already charging £1.20.

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According to price comparison website PetrolPrices.com, the BP Park Lane station beside Hyde Park was charging £1.20 a litre for unleaded on Monday.

Prices are currently even higher in parts of the Highlands and Islands of Scotland, which the AA says usually have the second highest prices after central London, due to the high distribution costs.

The price of unleaded in Stornoway on the Isle of Lewis was 122.8p a litre on Monday.

However, prices can be even higher at small, independent owned garages across the UK, as they cannot buy their fuel supplies in bulk.

'Inflation risk'

AA president Edmund King told the BBC: "We all know government finances are in dire straits but a 3p rise in fuel duty is not good for the economy and could fuel inflation."

He said that the cost of wholesale petrol had risen by 17% in the past month, and this had not yet been passed on fully at the pumps.

Therefore, the average price of petrol could hit £1.20 before 1 April, he said.

The AA said families now paid £52 a month more on petrol than a year ago.

'Complete disgrace'

The price of oil is a major factor in the price of petrol, and yet the current oil price of about $80 a barrel is far below the $147-a-barrel high seen in the summer of 2008, the last time petrol prices neared £1.20 a litre.

This has led many to question why petrol costs so much right now.

Lindsay Hoyle, Labour MP on the Commons business committee, told the Daily Telegraph: "Crude oil has gone up this year, but nothing like the rise in petrol prices. Motorists are being legally mugged at the forecourt by petrol companies."

He called the current high price of petrol a "complete disgrace".

Analysts said increased refining costs and the weakening of sterling against the dollar - the currency in which oil is priced - helped to explain some of the increase in petrol prices.

Mr King said a lack of refining capacity in Europe had contributed to the rise in wholesale prices.

"The oil industry needs to look at refining capacity to keep costs down," he said.

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