The financial pressure easing on millions of British households from falling inflation could be short lived as warnings emerged that fuel prices could head for £1.50 per litre combined with poor harvests affecting food costs.
The price of crude oil has been forced up in price due to rising tensions in the Middle East along with a rise in demand in the USA during its holiday season.
Fuel accounts for nearly five per cent of the Consumer Prices Index and any rise on the current average cost of £1.37 per litre rising could quickly reverse the current decline in inflation.
The erratic weather is also disrupting farming production in the UK and Europe. Weather has been going from the extremes of high temperatures and heat waves to torrential rain. Food makes up 9.8 per cent of the Consumer Prices Index.
The Petrol Retailers’ Association, that represents independent forecourts, said wholesale prices had risen by about ten per cent ‘while Britain has been absorbed by two weeks of Olympic excitement’.
Chairman Brian Madderson said: ‘This is really bad news for motorists and retailers alike. The full effect of the wholesale price increase of nearly 10p per litre since late June has yet to be passed on at the pumps.”
“Should there not be any downward correction to oil prices this autumn, the spectre of £1.45 to £1.50 a litre for petrol could return.” The recent peak was £1.41 a litre in April.
The fall inflation in recent months has been the only good news that the British economy has seen for a while, which has eased the pressure slightly on households.