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Diesel likely to pass pounds 1 a litre as oil price spirals.

Businesses and motorists have been warned of rising costs as the price of oil spiralled to new highs amid growing international tensions.

Experts said that the average cost of a litre of diesel could break the pounds 1 barrier this summer, while unleaded petrol was likely to get "very close".

The warning came as the cost of crude oil hit record levels in both London and New York over fears surrounding the nuclear stand-off between Iran and the West and supply disruptions in Nigeria.

The cost of Brent crude in London hit $72.20 (pounds 40.57) a barrel, while light sweet crude rose to $70.88 (pounds 39.83) 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.

The previous high of $70.85 (pounds 39.83) was reached on August 30 last year when Hurricane Katrina lashed at the United States Gulf Coast and wreaked havoc on the region's oil industry.

That helped send the average cost of unleaded petrol up to 96.6p a litre in September and diesel up 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 pounds 1," he said. "I don't think petrol will ( although it will get very close to it."

On Thursday, the average price of a litre of unleaded was 93.6p a litre, while diesel was 97.08p a litre.

The AA Motoring Trust said the cost of unleaded has been going up by a penny a week for the last three weeks, but may not surpass last summer's high.

Spokesman Luke Bosdet 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."
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Publication:The Journal (Newcastle, England)
Date:Apr 19, 2006
Words:393
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