More economic blues as oil price soars

January, 03, 2008

There’s more bad news for the British economy as the price of oil hit a record high of $100 a barrel last night, before falling back slightly this morning.

If higher mortgage repayments and rising energy bills weren't enough, soaring petrol prices are just a further painful hit to many people's wallets.

Prices are at record highs, with a litre of unleaded now standing at an average of 103.3p across the country, rising above 106p in London. Diesel prices have risen above 109p a litre.

To put this in perspective the cost of filling a typical 50-litre tank now costs £7.36 more than a year ago.

Free financial advice

So what’s causing oil prices to soar?  A weak dollar, violence in Nigeria, Algeria and Pakistan, and the threat of cold weather are all playing their part in the New Year rise.

However, trading volumes yesterday were about half those of a normal Wednesday, so the price might have been exaggerated by speculative buying.  Editor of the oil market Schork Report, Stephen Schork, belives the price jump was down to a single trader.

Unfortunately the gloom and doom doesn’t end there, the high price of oil means high inflation as the impact is felt by manufacturers facing increased costs for everything from electricity to transportation. 

Costs that ..  yes you guessed it, all get passed down to the consumer.

 SaveBorrowSpend                    Philippa Adam