Rising oil prices threaten to derail Britain’s fight against inflation – proving harder than expected to defeat it, the figures show.
Brent crude rose as high as $93 a barrel after a deadly explosion at a hospital in Gaza City further inflamed tensions in the Middle East.
If oil prices continue, they could impact the cost of gasoline and diesel.
Figures released yesterday by the Office for National Statistics (ONS) showed rising fuel prices are a hurdle in the fight against inflation, which remained at 6.7 per cent in September.
Economists had expected the consumer price index, which measures inflation, to fall to 6.6 percent.
Filling up: Figures published by the Office for National Statistics show that rising fuel prices at the pumps are already a hurdle in the fight against inflation
Supermarket shoppers were pleased as food prices fell 0.2 percent, the first fall since September 2021.
However, this was offset by the rising cost of refueling, with petrol rising 5.1p per liter and diesel rising 6.3p in August.
Interactive Investor’s Victoria Scholar said: “Rising oil prices have pushed up fuel prices, partially offsetting the impact of the Bank of England’s aggressive interest rate hikes on the overall inflation rate.”
“A further rise in oil prices could prevent inflation from falling to more normal levels and could pave the way for further tightening of monetary policy by the central bank.”
Experts still believe that UK inflation is on the way down and is expected to fall significantly when October figures are published next month due to lower gas and electricity bills. Ofgem’s energy price cap was cut at the start of October.
However, the volatility in energy markets triggered by Hamas atrocities in Israel, which has driven up gas prices in Europe as well as oil prices, is being monitored by central banks and government officials.
Markets fear the conflict could spread to the Middle East and disrupt oil supplies. The focus is on Iran, a regional power player and supporter of Hamas, which is the subject of US sanctions.
Iranian Foreign Minister Hossein Amir-Abdollahian yesterday called on Middle Eastern governments to impose an oil embargo on Israel – although OPEC+ cartel sources said it had no plans to take such action immediately.
Analysts are closely watching how Israel’s military response unfolds. Commonwealth Bank of Australia’s Vivek Dhar said: “A long occupation is on the horizon, driving Brent oil futures above $100 as it raises the risk of the Israel-Hamas conflict expanding and may directly attract Iran.”
Other factors are also driving oil prices higher – U.S. crude inventories are depleting faster than expected and China is posting stronger-than-expected growth in the third quarter.
But it is the Israel-Hamas conflict that currently poses the greatest threat, overshadowing last week’s meetings of the International Monetary Fund (IMF) and the World Bank in Marrakech, Morocco.
IMF chief economist Pierre-Olivier Gourinchas said a 10 percent rise in oil prices could shave 0.15 percent off GDP growth next year and raise global inflation by 0.4 percentage points.
Businesses face a £2bn rise in business rates
Businesses face an estimated £1.95 billion rise in business rates next spring due to yesterday’s inflation figures, according to property consultancy Altus.
Normally interest rates rise in April in line with last September’s consumer price index – but this year they have been frozen.
Altus said businesses face a “double whammy” in 2024 as business rates discounts for £2.4bn worth of retail, leisure and hospitality space come to an end as higher rates come into force.
Alex Probyn of Altus said: “Customers tell us that the burden of business rates is disincentive to invest and is at unsustainable levels.”
Altus said £415m of the increase expected in April would be borne by the retail sector.
Trade body UK Hospitality said restaurants, pubs and bars face a £234 million bill if business rates rise and a £630 million hit when the discount ends – calling on the Chancellor to undo both.