UK gas could soon rise 40% and electricity by 20%

Fresh warnings have emerged that oil prices could go even higher than Friday’s record close and domestic gas prices in Britain may surge by 40% on the back of the trend.

Oil saw its biggest-ever one-day price jump on Friday with a leap of more than $11 a barrel to yet another all-time high of $139.12, meaning that the cost of the fuel has risen sevenfold since 2002 and doubled in the past 12 months, raising fears of both inflation and recession in oil-consuming nations.

Website theEnergyShop.com warned over the weekend that gas prices to retail customers could soon rise 40% and electricity by 20%. On Friday, forward wholesale gas prices rose 5.3%, meaning they are up 76% in the past year.

Joe Malinowski, founder of theEnergyShop.com, said wholesale prices for gas have risen above retail prices.

“The last time wholesale gas prices broke above retail gas prices was two years ago, in June 2005. In the following 18 months energy bills rose by a record 47%. A very similar thing is going to happen this time around, except that the money value of the increase is going to be even higher,” he said.

Prices look set to open higher this morning after Mohammad Ali Khatibi, Iran’s representative at the oil producers’ cartel Opec, forecast yesterday that prices would hit the $150 a barrel mark by the end of summer.

Similarly bullish comments came from Shokri Ghanem, head of Libya’s National Oil Corporation, who said there were no moves within Opec, which pumps a third of the world’s oil, to increase supplies further. “I think it [the oil price] will go higher. That is a trend that will continue for some time. The easy, cheap oil is over, peak oil is looming,” Ghanem said, referring to the theory that world oil supplies may be about to peak and start declining.

Ghanem added, however, that oil prices were rising at the moment for other reasons, such as speculation and concern over political tension in the Middle East.

Energy ministers of the Group of Eight rich nations failed over the weekend to back Gordon Brown’s demand to urge Opec to increase supplies of crude oil.

Instead the ministers, meeting in Japan with non-G8 countries China, India and South Korea, which jointly with the G8 consume two-thirds of the world’s oil, talked of the need to promote energy efficiency.

“We will continue to vigorously promote policies and measures for improving energy efficiency,” they said.

Surging oil and food prices over the past couple of years have pushed up inflation in many countries at a time when economies are slowing, preventing central banks such as the Bank of England and European Central Bank from cutting interest rates to head off recession.

Governments around the world are struggling with street protests and even riots against rising food and petrol prices. In Britain, pump prices are already at record highs, leading to pressure on the chancellor, Alistair Darling, to scrap a planned 2p a litre fuel duty rise scheduled for October - even though that would make little difference to prices. Diesel is already more than £1.30 a litre in many parts of the country.

Airlines are warning that they cannot make money with fuel prices at these levels and many expect to plunge into losses. Ryanair boss Michael O’Leary has predicted that several European airlines will go out of business and US carriers have signalled they are to start charging for baggage.

The aerospace group Boeing warned yesterday that orders for its new planes were “on a knife edge”.

However, the US energy secretary, Sam Bodman, acknowledged at the weekend that the Bush government was powerless: “There are relatively few things we can do short term.”

The German economy minister, Michael Glos, said yesterday he was worried at the rapid rise in oil prices and wanted greater international cooperation on the issue.

Source - TheGuardian