Travellers suffer as oil prices rise again
Pain from record oil prices was felt today as the cost of filling petrol tanks rose and British Airways upped its fuel surcharge on long-haul routes.
Motorists in the UK were warned that £1 per litre of diesel could become the norm this summer after the cost of crude oil reached an all-time high in both London and New York.
BA complained that its annual fuel bill was now expected to be 50% higher than it previously thought and it had no option but to raise its levy on long-haul tickets from £30 (€43.40) to £35 (€50.60) for a one-way trip.
At £2.2bn (€3.2bn) for the year beginning in April, BA said the cost of filling its aircraft fleet would be £600m (€867.4m) higher than the previous 12 months.
Martin George, commercial director at BA, said: “Our fuel costs remain a real burden. The price of oil has risen above $70 a barrel and experts anticipate it staying at these levels for some time.”
The cost of Brent crude in London hit $72.20 a barrel today, while light sweet crude rose to $70.88 a barrel in New York.
Analysts said oil prices were likely to climb further as long as geopolitical risks in Iran and Nigeria posed threats to supply at a time when global demand remains strong and supplies are tight.
The previous high of $70.85 for light, sweet crude was reached on August 30 last year when Hurricane Katrina tore through the Gulf of Mexico and wreaked havoc on the region’s oil industry.
The effects of high oil prices have been felt across British industry and packaging specialist DS Smith became the latest to feel the pinch, warning today that its profits were set to miss expectations set at the time of its interim results.
DS Smith, which operates six paper mills in the UK, said it expected to pay £23m (€33.2m) more for gas and electricity in the 12 months to April 30 than it did in the previous year.
Shares in DS Smith slumped 18% today as analysts rubbed out their forecasts for around £60m (€86.7m) profits compared with £76m (€109.8m) a year earlier.
In its statement, BA said it currently cost nearly four times as much to fill up a plane than it did at the end of 2001 and fuel was its second largest overhead after staff salaries.
Today’s increase in the fuel surcharge is the sixth since BA introduced it in May 2004 and came at the end of the Easter season for flights.
It will come into effect on Friday as BA follows Virgin Atlantic which put up its fuel surcharge on long-haul flights by a similar amount last month. However, BA is holding the levy on its short-haul trips to £8 (€11.60) one-way.
At the pumps, petrol prices moved closer to record highs set in the wake of Hurricane Katrina when the average cost of unleaded reached 96.6p a litre and diesel rose to 98p a litre on this side of the Atlantic.
Petrol Retailers’ Association director Ray Holloway said those prices were “in danger of being broken” this summer if the cost of oil remained high and demand for fuel continued to rise in the US for the summer driving season.
“Diesel was 98p a litre and I think it will break £1,” he said. “I don’t think petrol will – although it will get very close to it.”
The AA Motoring Trust said the average price of a litre of unleaded petrol was 94.4p yesterday, while diesel was 97.62p.
It said the cost of unleaded has been going up by a penny a week for the past three weeks but may not surpass last summer’s high.
Spokesman Luke Bosdet said said a similar spike in oil prices in January and February had little impact on petrol and added that the latest surge would only send prices at the pumps higher if it was sustained.
“The real problem is how long the oil price hike lasts not how high it goes,” said Mr Bosdet. “This big surge could cause problems if it continues.”
Oil prices have soared by more than $10 a barrel over the last four weeks and analysts believe they could rise further.
The latest rally in oil prices came amid growing fears of military action against Iran, which has said it will proceed with plans to enrich uranium despite warnings from the United States, Europe and the United Nations.
It was also driven by the disruption of crude supplies in Nigeria, where more than 500,000 barrels a day of production has been lost due to militant violence.
And in the Gulf of Mexico, more than 300,000 barrels a day remain off the market as a result of last year’s hurricanes.
