Oil prices touching new highs

Oil prices touched a 12-month high today, prompting fears of petrol hikes on the forecourt.

Worries about a possible war in Iraq, following Baghdad’s decision to reject any new UN resolution, drove the increase.

Adding to the jittery mood was a White House acknowledgement that the Pentagon had submitted a detailed set of military options for action against Iraq.

Hurricane Isidore also played a part, however – Mexico is a major supplier to the US and thousands of workers had to be evacuated from off-shore sites.

In the US, benchmark crude shot up above $30 a barrel to 19-month highs and in London, Brent jumped 1.7% or 48 cents to 28.91 dollars by late morning.

If sustained, the hikes are likely to be bad news for motorists.

Henk Potts, equities strategist at Barclays Private Clients, said: “We have to believe that this will be reflected at the pumps.”

But he added that should an attack on Iraq get the go-ahead, the cost of crude oil – and hence petrol – was likely to fall.

Oil cartel OPEC last week decided against rising production levels, despite a number of countries moving into winter.

It said war fears rather than a shortage were driving prices although output will rise automatically if they stay above $28 for a specific period.