Pressure on fuel bills as oil prices hit high

Motorists’ fuel bills looked set to come under further pressure today after oil prices hit new record levels.

A barrel of light crude for September delivery rose towards 64 US dollars, amid jitters over the US government shutting its embassy in Saudi Arabia because of security concerns.

Just last week the AA Motoring Trust said surging oil prices had sent the cost of a litre of unleaded petrol over the £1 mark in some areas, and warned there was little chance of prices coming down. The average price is now near 90p.

Luke Bosdet, a spokesman for the AA Motoring Trust, said UK motorists were now spending an extra £7.5m (€10.8m) a day on fuel compared with during January.

He said: “Everybody hopes that when the price of crude oil comes down, petrol retailers will bring their prices down as quickly.”

The US said the closure of its diplomatic base in Riyadh and consulates in Jeddah and Dhahran today and tomorrow was “in response to a threat against US government buildings”.

It comes less than a week after the death of King Fahd of Saudi Arabia rocked the markets and led to speculation of a change in oil policy in the desert kingdom.

Threats in Saudi Arabia are particularly troubling to traders as the country is the world’s biggest oil producer.

With other nations pumping oil at close to capacity to meet spiralling demand in emerging economies such as China, a severe disruption to Saudi supplies would be damaging.

However, reports quoted a spokesman for the Saudi interior ministry as saying his government had no information about a possibly security threat.

Oil cartel Opec announced at the end of last week that it has increased production by 300,000 barrels of crude a day to about 30.4 million barrels in a bid to cool prices.

Recent data has shown that the US economy is growing robustly and demand for oil and diesel is set to remain high.

At the same time, companies are battling to restart production at a number of US refineries that have suffered storm damage or fires.

Oil prices are 42% higher than a year ago and pose a major headache for UK companies which rely heavily on fuel.