New fuel price warning on Syria tension

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Though President Obama has resisted a strike on Syria, oil prices beat a path north last week, climbing 3% to $114. Such a surge is likely to reflect a price rise on UK forecourt sticker prices soon.

Uncertainty about key Middle East trade and oil arterial trade routes such as the Suez Canal and Iran's Strait of Hormuz is spurring UK capacity concern. How bad could it get?

C-word

First, Syria is not a major oil producer. That's of little consequence. It's the c-word - contagion. Some City analysts have warned that should the region destabilise further - Egypt worries are difficult to ignore - in the aftermath of a US strike, oil prices could quickly hit $150 a barrel.

"Last week there was an attempt on a ship on the Suez canal, though it was foiled," says the AA's Paul Watters. "It's about about general destabilisation of the region. Like always, it's fear of what might be, not what is."

He goes on: "Speculation plays its part, and ripples through very quickly. Looking at the current analysis of prices, there maybe a penny or two on recent speculation that we may see in the coming weeks. We did have 140p [a litre] in March, but this shouldn't take us there."

The AA, then, plays down the likelihood of a serious UK fuel price spike, despite some worry excess from other quarters. It's likely, also, Saudia Arabia would open up the oil taps should the situation deteriorate; so some off-setting potential. (Demand from the US and Europe, as well as China, is not high currently.)

Supermarket advantage

Supermarket fuel prices are generally more resistant to prices rises, says boss of the Petrol Retailers Association, Brian Madderson. "They have a one to two week price lag built into their contracts which means they can be shielded when prices go up quickly; they can hang onto lower prices longer than the independents."

But he warns: "The geo-political situation is a boiling cauldron at the moment. You've got Libya, which the West was completely unable to bring to democracy. Libya's oil output currently is just one-eighth of its previous capacity."

"In Egypt you've a military junta-style takeover. Nigeria also has damaged pipelines. And Iran is threatening retribution should the West take action against the Syrian regions. It's starting to look pretty horrid."

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