Petrol could rise to £2.50 a litre, while diesel could rise to £3 and could even be rationed, experts told MPs on Monday, as they warned that Ukraine’s invasion of Ukraine Russia would aggravate the pain for consumers.
In testimony before the Treasury select committee, leading economics and energy analysts also called on Chancellor Rishi Sunak to subsidize low-income households to cope with soaring utility bills. domestic energy, in the context of a broader crisis in the cost of living.
Pump prices have surged in recent weeks, hitting a succession of new highs amid the Ukraine crisis. Latest figures from the UK forecourt of data firm Experian Catalist broke records again, with the average cost of a liter of petrol on Sunday reaching 163.5p, while diesel was 173.4p.
However, the Treasury committee has been told prices could rise even further if geopolitical tensions keep oil prices high, with the cost of diesel in the UK, which gets 18% of it from Russia – potentially doubling .
“Consumers should be prepared for a continued rise in fuel prices,” said Nathan Piper, head of oil and gas research at Investec Bank.
Asked about the potential cost of fuel, he replied: “Don’t be flippant, just pick a number.”
Dr Amrita Sen, founding partner and chief oil analyst at research consultancy Energy Aspects, said the group was working on the assumption that oil could “easily” rise by 50%.
She said: “If you do it on a crude oil basis, we’re saying it could easily go up 50%. Assuming no tax changes are implemented by the government, [petrol] could end up being £2.40 per litre.
She said that due to diesel’s role in the industry it “could go as high as £2.50 or even closer to £3. It’s definitely within the realm of possibility.
Sen added that diesel will likely be rationed in Germany before the end of March and the same could happen in the UK.
While the UK receives relatively little crude oil and gas from Russia, around 18% of diesel imports came from Russia in 2020.
Piper said the industry would likely bear the brunt of any rationing, but stressed the impact would be felt more broadly. “Diesel runs the world,” he said. “Diesel runs shipping lanes, trains, cars, everything.”
The price of Brent crude oil approached record highs during the Ukraine crisis, while gas rose well above the all-time high reached only last year, in Europe and the UK.
Sen said the additional cost to UK households could reach £60billion a year if gas prices remained at record highs.
The Chancellor could mitigate this by introducing a grant of up to £500 for low-income households in this month’s spring statement, according to Professor Jagjit Chadha, director of the National Institute for Economic and Social Research.
Sen, Piper and Tony Danker, the chief executive of business lobby group CBI, all said the UK should invest more in North Sea oil and gas as a stopgap alongside heavy investment in renewable energies.
Labor has called for a windfall tax on North Sea oil and gas companies to pay a £200 cut on household energy bills.
However, Piper said the amount raised would be “de minimis” because the largest and most profitable oil and gas companies, such as BP and Shell, produce relatively little from the North Sea. The biggest companies operating in the North Sea mostly suffer large tax losses because their investments have failed, he said.
Piper opposed suggestions that rethinking the fracking ban could help the UK achieve energy security and lower gas prices, calling it a “red herring”.
Francis Egan, the chief executive of British hydraulic fracturing company Cuadrilla, criticized the government for appearing to flip-flop on its policy towards the controversial technology.
The UK imposed a moratorium on fracking in 2019, while Cuadrilla was ordered by the Oil and Gas Authority (OGA) to plug two shale gas wells in Lancashire earlier this year. Business Secretary Kwasi Kwarteng had also appeared to reject fracking until last week when he said Boris Johnson thought it made “no sense” to rule it out.
Writing on Cuadrilla’s website, Egan said the government and the OGA should “formally withdraw their instruction to plug wells.”
He added: “They should also put reasonable protections in place to ensure that companies like Cuadrilla and others are not forced to bear the risk and financial cost of operating in a position where a government can continue to change. advice and require the wells to be cemented. when they are eminently useful.