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Motorists warned cost of tank of petrol 'to hit £100' by 2015
Motorists have been warned that the cost of filling up their cars is to rise dramatically within a few years and could hit £100 per tank of petrol, leading economists warn.
Struggling families were told to brace to expect the average cost of unleaded petrol to rise from an average of £1.34.8 today to £1.54 within four years.
Experts said this would the cost of filling up a Ford Mondeo, which has a 70-litre tank, will rise from just over £93 to nearly £108.
After a brief respite, fuel costs will rise again within a few months amid surging demand from booming Asia economies, which are expected to trigger a boom in oil markets, according to forecasters at the Ernst & Young ITEM Club.
This is despite oil and petrol prices expected to fall soon, as disruptions to supply from the Libya conflict and recent Hurricane Irene America’s most lethal and financially damaging hurricane in recent few years fade.
The steep rise in energy and petrol prices will intensify the squeeze on households at a time when average pay rises are well below inflation.
“By 2013 prices at the pumps will be eating into household finances once again,” said Neil Blake, a senior economic adviser to the ITEM Club.
“Demand from the emerging markets will maintain the pressure on inflation, as will the increase in fuel duty on the home front.”
George Osborne, the Chancellor, is set to introduce a deferred annual increase of 3p a litre in January, followed by another likely rise next August.
David Cameron, the Prime Minister, is facing the prospect of a backbench rebellion over petrol prices, after more than 80 MPs (BSE: MPSLTD.BO - news ) supported calls for the Government to tackle rising fuel tax.
While hard-pressed consumers should receive some respite next year, as inflation is expected to ease from above 5 per cent to below 2 per cent, it will be “short-lived", he added.
The ITEM club expects food price inflation to slow from 6.4 per cent this year the equivalent of an average annual food bill of £204, to 3.7 per cent next year, or about £128.
“The good news is that food, oil and petrol prices will all start to come down next year, providing some much-needed relief for the hard-pressed consumer,” he said.
“However, the five-year outlook is far less rosy as inflationary pressures begin to bite again and this will be compounded by weak wage growth.”
But there is a strong chance, inflation will pick up again, meaning a further eroding of workers’ wages, he added.
The Bank of England must raise its official inflation target in order to avoid jeopardising the fragile economic recovery, he added.
The Bank was urged to raise its inflation target from two per cent to 2.5 per cent in order to “give it a bit more leeway".
“It will be extremely hard to stick to the 2 per cent target over the next decade,” Mr Blake said.
“Although we expect the overshoots to be modest, raising interest rates as a countermeasure would potentially be disastrous; there is a strong case for the target to be relaxed.
“However, the five-year outlook is far less rosy as inflationary pressures begin to bite again and this will be compounded by weak wage growth.”
With little prospect of a fall in unemployment, workers will have “limited bargaining power” during their annual wage negotiations.
“Consumers need to enjoy next year's respite as much as they can,” he added.
Struggling families were told to brace to expect the average cost of unleaded petrol to rise from an average of £1.34.8 today to £1.54 within four years.
Experts said this would the cost of filling up a Ford Mondeo, which has a 70-litre tank, will rise from just over £93 to nearly £108.
After a brief respite, fuel costs will rise again within a few months amid surging demand from booming Asia economies, which are expected to trigger a boom in oil markets, according to forecasters at the Ernst & Young ITEM Club.
This is despite oil and petrol prices expected to fall soon, as disruptions to supply from the Libya conflict and recent Hurricane Irene America’s most lethal and financially damaging hurricane in recent few years fade.
The steep rise in energy and petrol prices will intensify the squeeze on households at a time when average pay rises are well below inflation.
“By 2013 prices at the pumps will be eating into household finances once again,” said Neil Blake, a senior economic adviser to the ITEM Club.
“Demand from the emerging markets will maintain the pressure on inflation, as will the increase in fuel duty on the home front.”
George Osborne, the Chancellor, is set to introduce a deferred annual increase of 3p a litre in January, followed by another likely rise next August.
David Cameron, the Prime Minister, is facing the prospect of a backbench rebellion over petrol prices, after more than 80 MPs (BSE: MPSLTD.BO - news ) supported calls for the Government to tackle rising fuel tax.
While hard-pressed consumers should receive some respite next year, as inflation is expected to ease from above 5 per cent to below 2 per cent, it will be “short-lived", he added.
The ITEM club expects food price inflation to slow from 6.4 per cent this year the equivalent of an average annual food bill of £204, to 3.7 per cent next year, or about £128.
“The good news is that food, oil and petrol prices will all start to come down next year, providing some much-needed relief for the hard-pressed consumer,” he said.
“However, the five-year outlook is far less rosy as inflationary pressures begin to bite again and this will be compounded by weak wage growth.”
But there is a strong chance, inflation will pick up again, meaning a further eroding of workers’ wages, he added.
The Bank of England must raise its official inflation target in order to avoid jeopardising the fragile economic recovery, he added.
The Bank was urged to raise its inflation target from two per cent to 2.5 per cent in order to “give it a bit more leeway".
“It will be extremely hard to stick to the 2 per cent target over the next decade,” Mr Blake said.
“Although we expect the overshoots to be modest, raising interest rates as a countermeasure would potentially be disastrous; there is a strong case for the target to be relaxed.
“However, the five-year outlook is far less rosy as inflationary pressures begin to bite again and this will be compounded by weak wage growth.”
With little prospect of a fall in unemployment, workers will have “limited bargaining power” during their annual wage negotiations.
“Consumers need to enjoy next year's respite as much as they can,” he added.
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