£5 gallon on the way

Petrol prices are soaring to a new high, approaching £5 a gallon for the first time. The cost of oil surged through the 100 dollars-a-barrel mark for the first time last night, meaning that more misery is on the way for motorists.

Each visit to the petrol station to fill up now costs an average of £7.36 more than it did this time last year, according to the AA.

And there is little prospect of prices falling again, leading to a threat of inflation and the destabilisation of the British economy.

British drivers now face paying a new high of 103.3p for a litre of unleaded petrol, beating the record of 102.92p set on Boxing Day.

The AA revealed that diesel now costs just under 108p a litre, just short of the record 108p set on December 6. If and when prices hit the £1.10 a litre mark, it will mean that fuel is selling at more than £5 a gallon.

The AA's Paul Watters said: "The closure of superstores over the festive holidays may account for the new record high for petrol."

The oil price increase is bad news for the economy as well as the UK's 33million motorists. It is set to slow the speed at which the Bank of England is able to cut interest rates. Meanwhile, British Gas says higher gas prices mean that bills for its 10million customers might have to rise, and rising food prices threaten to push up the cost of the weekly supermarket shop.

The soaring price of oil has been blamed on the weak dollar, violence in Africa and the Middle East and fears over declining US oil stocks.

The price of gold – seen as a safe haven for investors – also soared to its highest level yet as investors fretted over the prospect of further cuts in US interest rates to stave off a recession.