Motorists warned oil price rises could raise cost of fuel by 4c a litre

MOTORISTS were warned yesterday that they face a 4c hike in the cost of a litre of petrol if oil persists at current high levels.

Oil per barrel hit more than $45 on Tuesday as fears over Iraq and Russia’s ability to deliver supplies undermined market sentiment.

The AA warned that people should “get used to paying over €1 per litre for the foreseeable future in response to the crisis”.

Oil prices were $20/22 per barrel two years ago and some experts warn if Iraq erupts it could go to $100 per barrel before long.

Consumers’ Association chief executive Dermot Jewel said “costs will significantly start to be passed on if oil prices continue to rise at this rate”.

The cost per litre was as high as €108.6 in a north Dublin garage yesterday but was substantially lower at Tesco, 93.9c at one outlet.

The National Taxi Drivers Union has also asked that the new regulator be given power to grant fare increases.

It is expected that operators nationwide will seek an interim increase to compensate for the recent price increases.

SIMI chief executive Cyril McHugh said the latest oil hike would push prices beyond e1 per litre and hit the ordinary motorist hard. Hauliers have already seen their budgeted price of 47c per gallon for diesel go to 70c, which is over 20c over budget.

SIMI has called on the Government to cut duty on fuel by 5c a litre.

Mr McHugh added VAT and excise duty account for nearly 70% of the price of fuel and the time had come for the Government to reduce the level of duty.

How long rising oil prices will continue to affect motorists and consumers is difficult to say.

IIB Bank chief economist Austin Hughes said much of the increase is down to uncertainty about Iraq and the fear that terrorists will wreak havoc by blowing up oil pipelines in the months and years ahead.

There is concern, too, about Russia’s ability to continue to deliver oil in present quantities and a growing fear that the oligarchs, who became oil billionaires, will ultimately be brought to heel and have much of their wealth taken from them.

There are also fears that Russia’s shift from communism to democracy has been anything but smooth and there are genuine concerns that political instability could return, placing added pressure on oil supplies.

Even if oil goes to €50 per barrel most of the bad news has already been taken on board by the markets and by the US.

Mr Hughes said oil price uncertainty has become a factor in the post 9/11 world and oil prices “could spike higher at any time”.