Daily Telegraph: A week is a long time in politics of the pump: “The culprit is Hurricane Katrina, which has spread a petrol shock from the Gulf of Mexico right across the world. Pump prices are soaring from Australia to Zambia, triggering dismay, and even threats of strike action.”: Saturday 3 Sept 2005
With the average two-car family already paying an extra £23 a month for petrol than in January, Malcolm Moore takes stock at the forecourt
Put this paper down (not now, at the end of the article), go out and fill up your petrol tank.
From Monday morning, petrol will cost between 2p and 4p more a litre at the pumps - or up to 15p a gallon. Next week it could cost more. There are predictions that the current average price of 92.3p a litre could finally burst through the £1 mark.
The culprit is Hurricane Katrina, which has spread a petrol shock from the Gulf of Mexico right across the world. Pump prices are soaring from Australia to Zambia, triggering dismay, and even threats of strike action.
Katrina shut down or submerged nine key refineries near New Orleans, which supply more than a tenth of the petrol used in the United States every day.
Worse, the fact that electricity, oil and water do not tend to mix calmly will delay efforts to bring back on line the refineries, and the pipelines that connect them to the rest of the country.
US supplies are very low, and some filling stations are running short. In an unfortunate twist, refineries had cut back on their production of petrol before Katrina struck, because of weak demand.
Today is the last gasp of summer for many Americans, as the Labor Day long weekend gets underway. Drivers keen to holiday in their Airstream mobile homes have started forming queues at the pumps.
Things are so bad that Spain and Germany, who do not have a very "special" relationship with the White House, have pledged supplies of fuel. Gerhard Schroeder said the International Energy Agency would ship two million barrels of oil a day to help out.
Meanwhile, petrol prices in the US have soared as high as $6 a gallon in some areas, or 87p a litre, despite President Bush's vow to prosecute any forecourts guilty of profiteering.
Indeed, the US is so desperate for petrol, it has bought more than 20 supertankers of European petrol in the last two days. This has doubled the cost of chartering a supertanker from North Europe to New York or Philadelphia and pushed up the wholesale price of petrol by over $200 to $857 a tonne in Rotterdam, where the market is based.
That is the equivalent of a 10p-a- litre rise in the price that UK petrol stations must pay for their supplies - a lot of which will eventually be passed on to us.
The price at the pumps has held steady this week, because it is usually calculated on Monday. That is when the previous week's average wholesale price is totted up, and converted to sterling using the Natwest dollar rate. Retailers then try to add a margin, and chalk the sum up on the board.
Because wholesale prices only started rocketing in the last two days of this week, next week's rise will be a maximum of 4p, according to Ray Holloway at the Petrol Retailers' Association.
However, if the wholesale price continues its strength over next week, prices could soon start severely damaging your wallet. The AA has calculated that the typical two-car family is already paying £23 more a month for its petrol than it was in January.
Shell and BP say they will not pass on all the rise in wholesale prices, but that they do not wish to speculate how high prices could go. Asda said it would only put up prices as a last resort.
Do not be too glum, the spike could be relatively short-lived. Mr Holloway says: "A week is a long time in this game". He believes that although the loss of more than 10pc of US refining capacity is a serious issue, the country still has 64 other refineries which should be able to step up production to compensate.
There is also no shortage of crude to keep them supplied - US crude stocks are more than 8pc higher this year than last.
Several consumer groups will also be keeping an eye on petrol retailers to ensure that prices are not raised beyond what is necessary, although both Shell and BP claim they are making losses this year on their forecourt sales.
The wider economic implications of a spike in oil prices, after Katrina sent the price of crude close to $70, are more difficult to gauge. The jump in the price of oil has been stretched over five years, making it closer in kin to an evolution than an explosion, and the world has learned to cope with high oil prices.
So far, it has failed to affect inflation. In the UK, 1 percentage point of the 1.3 percentage point increase in the consumer price index since last year is unrelated to fuel costs. Because the Chancellor takes more than three quarters of every pound we spend at the pumps, the increase in oil prices only affects a small part of the equation.
Meanwhile, our economy is no longer built on oil-intensive factories, but on the glass spires of Canary Wharf and the whizzy bankers inside them, and so we are much less addicted to the black stuff.
In fact, it is the developing world that is hardest hit by oil price rises, since they have a great thirst, and use it much less efficiently. The United Nations Commission for Trade and Development reckons that China uses more than twice as much oil per head as the developed world and India uses three times as much.
Nevertheless, an escalation of the oil price as America scrabbles for fuel is the last thing that the UK needs, as our economy struggles with weak growth this year.
Stephen Roach, the chief economist at Morgan Stanley, says: "Hurricane Katrina may well go down in history as the tipping point to another energy crisis," he said. "But it is important to keep in mind that oil prices had already pierced the $65 threshold before this devastating natural disaster occurred."
He blames the US, which guzzles a quarter of the world's oil. If Americans could curb their spendthrift use of energy, there would be a far greater spare capacity of oil. This dark effect has been felt in the UK for some time. This time last year, petrol prices were 15p per litre lower. You may not have noticed, since the bills have only eked up gradually, but Monday's shock should ram the message home.
So what are you waiting for? Grab that jerry can and get down to the petrol station. You could save enough on just one tank to buy next week's Saturday Telegraph.
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