Oil price at record £78 per barrel
THE PRICE of oil hit an all-time high in sterling yesterday, paving the way for record petrol costs at the pumps in the coming weeks.
The relatively weak pound means Brent crude spiked at around £78.50 a barrel, beating the previous record of £77.70 set last spring.
In dollar terms crude, squeezed up by supply worries linked to Iran’s confrontational stance, rose up to 1.3 per cent to nudge past $123 a barrel yesterday – a nine-month high.
The pound hit a ten-week low against the euro and lost 0.7 per cent against the dollar yesterday following surprisingly dovish comments in the Bank of England’s meeting notes.
Diesel has already hit an all-time high of £1.43 a litre in the last few days, and the current unleaded cost of nearly £1.36 a litre is edging closer to the record of £1.3743 set last May.
Luke Bosdet, spokesperson for the AA, said: “[The spike] will feed through to petrol prices, and it will completely strangle demand. We are going through an exact mirror of where we were last year, with tension in the Middle East creating fears over oil supply, and then market speculators intervening to push the price further.”
The wholesale price of oil will filter down to the pumps in as little as 10 days, Bosdet added. And it is not just the UK having to fork out for pricey fuel: the AA has criticised the all-time highs seen in Ireland, and the rest of the Eurozone is also feeling the pinch.
Analysts at Barclays Capital said this week’s Greek bailout agreement had further strengthened the oil market, with the chance of global downturn seen receding for now, meaning all eyes have turned to the growing uncertainty in the Middle East.
“With a strong fundamental backdrop of limited spare capacity and dwindling inventories, upside risks are clearly outweighing downside risks currently,” they said in a note.
Capital Economics even ventured a worst-case scenario of oil hitting $210 a barrel, if Iran decided to close the key trade route of the Straight of Hormuz. Chief global economist Julian Jessop said the spike poses a greater risk to Europe given its economic recovery is on a less firm footing than the US.