£8 gallon of petrol looms in summer

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The RAC Foundation warned drivers yesterday that an 8 gallon was on the horizon, while the Federation of Small Businesses said increasing prices could cost jobs.

RAC Foundation spokesman Philip Gomm said: "Already Scottish drivers pay amongst the highest fuel prices in Europe and they have good reason to fear that the unthinkable - the 8 gallon - could become reality.

"With another duty rise scheduled for April, and for two more years after that, plus continuing rises in the price of oil, there is huge upward pressure on pump prices. Oil is already trading at around $100 a barrel and a sustained recovery in the global economy is likely to push prices considerably higher.

"Factor in April's planned fuel duty rise and in theory pump prices in remote areas could hit 8 by the summer."

The grim forecast for parts of Scotland would see petrol and diesel creep up to 176p a litre in the most expensive places.

Independent fuel retailers, who purchase fuel in far smaller volumes than bulk buyers such as supermarkets, are expected to bear the brunt of any increases.

The Isle of Eday in Orkney has already been hit with a 12p a litre increase in diesel last month to reach 158p - or 7.18 a gallon. Susan Byers, boss of Eday's community-owned shop, has insisted, however, that small retailers "don't make any money" despite the soaring prices due to high wholesale costs for small garages.

Other parts of the Highlands were not far behind yesterday, with Colonsay at 151p for diesel, Lewis at 145p and Achiltibuie, north of Ullapool, at nearly 142p.

The latest Automobile Association fuel price report yesterday showed prices have increased at their fastest monthly rate for a decade, partly because of duty and VAT rises which have added 2.5p to pump prices.

It is feared a further duty hike in April could push up prices by another 5p because it is linked to the inflation rate.

The Federation of Small Businesses (FSB) warned today that the duty rise will force firms to lay off staff, freeze wages and cut investment.

It called for a future fuel price rise to be scrapped until a "stabiliser" was put in place to freeze or reduce duty to match increases in VAT revenues from higher pump costs.

The AA said the average petrol price in Scotland had gone up by 6.1p since last month to 127.7p. Diesel went up by 6.5p to 133.2p.

However, the RAC Foundation said any rise had to be averted - even though plans to hold down prices in rural areas may not be approved by the European Commission for months.

Mr Gomm said: "In reality, ministers must act long before this happens or else the impact on Scottish drivers and hauliers will be disastrous. The government must intervene or the economy risks grinding to a halt. If ministers ignore the plight of drivers - so often the silent majority - then general fuel protests are a distinct possibility."

Mr Gomm said, as a rule of thumb, a $2 rise in the price of oil lead to a 1p rise at the pumps.

He added: "Given that diesel is already 1.58 a litre in the Orkneys and would have to reach 1.76 to create the 8 gallon, we would have to see a $36 rise in the price of oil, from the current price of about $100.

"Given that the record price of oil was $147 back in 2008, clearly $136 or so is not beyond the realms of possibility.

"Add in scheduled fuel duty rises, and the possibility of 8 a gallon increases. Much will depend on whether the global economy actually recovers."

Western Isles SNP MP Angus MacNeil made a similar prediction last night.

He said: "Fuel prices in my constituency are already around 145p a litre - 6.50 a gallon - and they could rise to 7 by February-March, 7.50 by March-April and 8 by April-May, at the rate of rises over the last few months.

"The UK government will be laughing all the way to the bank, but they will also be choking rural Scotland if these prices come into effect."

Campaigners FairFuel UK also feared an 8 gallon was not far off. Spokeswoman Lynne Beaumont said: "I do not think it will be a year. Our fuel prices are rising higher than any other part of Europe and that has got to stop."

Brendan McLoughlin, founder of price comparison website petrolprices.com, agreed an 8 gallon loomed.

He said: "There is the possibility it could happen this year.

"If prices continue to rise the way they have been over the last month, it could be this year."

However, other motoring groups were more cautious.

Neil Greig, policy and research director of the Institute of Advanced Motorists, said: "It is still fairly far off - I would not have thought it would be this year.

"The only thing which would cause it would be a big increase in crude oil prices."

AA spokesman Luke Bosdet said: "We cannot really tell what's going to happen with oil prices."

The FSB said a snap poll of 400 of its members showed most expected to pay an extra 2,000 in the coming six months through rising fuel costs.

One in four feared they will have to freeze wages and one in ten said they will start laying off staff if the cost of fuel continues to increase.

FSB chairman John Walker said: "These figures show that the rise in fuel duty is really having a negative effect on small businesses. The government has said it is looking to the private sector to put the economy on a firm footing, but the hike in fuel duty is doing the opposite and hampering small business growth.

"With future fuel duty rises looking likely, small firms are just going to be left trying to survive.

"The government promised in opposition that it would put a fuel duty stabiliser in place, and it is clear that without such a measure, the country's five million small businesses will be put on a knife-edge.

"It is vital the government goes back to its pledge and puts this stabiliser in place."