Hurricane Katrina sparks surge in petrol prices

Motorists were today facing fresh hikes in the cost of petrol, but retailers said pump prices were unlikely to break through the £1 (€1.46) a litre mark this year.

The destructive path blazed by Hurricane Katrina in the United States forced up the wholesale price of petrol by 8p a litre last week and led to drivers being charged more for refuelling their cars at filling stations.

Shell was among the retailers to increase the price of a litre of unleaded petrol last week to an average of 94.5p at its 900 forecourts in the UK.

With £1 (€1.46) a litre looming as the norm in the UK, it has sparked fears that pumps will not be able to display figures higher than 99.99p a litre.

This could mean oil giants including Shell and rival BP having to spend millions of pounds upgrading the software that services the pumps.

Ray Holloway, of the Petrol Retailers Association, said a fresh increase in pump prices was certain as a reaction to the effects of Hurricane Katrina.

But he added: “I don’t think £1 a litre is on the horizon in the short term or even this year.

“Once Labour Day is out of the way in America this weekend then people will return to work and we should see a fall in (global) demand.”

Local competition has helped to restrain the rise in petrol prices, although some filling stations in remote parts of the UK are already charging £1 for a litre of unleaded petrol.

Prices of diesel, which averaged 96.3p at Shell stations on Friday, were being supported by a shortage of the fuel in Europe and this has led many analysts to rule out any major relief for affected motorists in the short term.

Retailers are under pressure as much as drivers because the rapid rise in petrol prices has not generated higher profits from their filling stations.

Around three-quarters of the cost of a litre of petrol goes to the Government in duty and tax.

A spokeswoman for Shell said: “In the UK we have lost money at the petrol pumps in both the first and second quarters of this year. Last week, the wholesale price of petrol went up 8p and we didn’t pass on all the costs of the product increases.”

In the US, there have been reports of panic buying of petrol amid fears that supplies will run short because of the loss of refining capacity.

To ease some of the pressure, the International Energy Agency has also agreed to release 60 million barrels of oil and refined products from its own stocks. The White House has ordered the release of some of the national reserves in the US, although this is mainly in the form of crude oil rather than refined products such as gasoline.

The cost of a barrel of US light crude settled at $67.57 a barrel on Friday after hitting a new record above $70 earlier in the week.

And with winter approaching when demand for oil usually peaks, many traders fear that prices could rise again.