Petrol prices unlikely to ease

THE cost of petrol will show no signs of easing in the coming months, the Automobile Association warned yesterday.

Despite weakening crude oil prices, down from $70 to $64 per barrel in recent weeks, AA spokesman Conor Faughnan warned prices would stay high for at least the next 12 months.

Next week’s AA survey will most likely show average price per litre at €1.20 at the pumps against the current average across the country of €1.17/€1.18.

The real issue for motorists right now is the lack of refining capacity, said Mr Faughnan.

Capacity is down 20% in the US alone following the recent hurricanes and refining capacity was already under pressure before they struck, Mr Faughnan said.

For that reason it would be wrong for consumers to expect lower prices for petrol as a result of falling crude prices, he said.

Neither falling crude prices nor the euro’s rise in recent days will have much impact due to the lack of refining capacity, he said.

“My expectation is that motorists can expect little easing in the cost of petrol pumps until the third quarter of next year at the earliest”, he said.

The euro rose against the dollar and the yen after German Christian Democrat leader Angela Merkel and Chancellor Gerhard Schroeder said they had reached a breakthrough in negotiations to create a coalition government.

The euro rallied for a second day from a three-month low against the dollar to hit $1.21.32 as Merkel, 51, yesterday told reporters in Berlin the Christian Democrats and Social Democrats share “common ground.”

The euro had dropped 1.6% since an inconclusive election on 18 September.

The euro has also benefited from expectations the European Central Bank will raise interest rates next year, said Callum Henderson, head of global currency strategy in Singapore at Standard Chartered Plc.

Despite yesterday’s decision to keep rates on hold it has emerged at least five ECB council members, including Germany’s Axel Weber and Greece’s Nicholas Garganas, in the past two weeks signalled concern about the impact of oil prices on inflation, boosting speculation for higher borrowing costs.

Investors are increasing bets the ECB will raise rates as early as the first quarter, according to futures trading. European service industries such as banking and travel grew at the fastest pace since July 2004 and manufacturing expanded at the most in seven months.