Oil prices may hit $150 a barrel by 4 July, a new report by Morgan Stanley has warned, spelling higher utility bills for British households already coping with higher gas and electricity prices.
The investment bank believes that increasing demand for oil from Asia will lead to more misery at the pump this summer. "We are calling for a short-term spike in oil prices," the Morgan Stanley report states. "Whilst Middle East oil exports are stable Asia is taking an unprecedented share."
The report comes as the price of oil continued its upward trend on the trading floor. At the end of last week, oil gained 4.5% to $5.49, bringing the price of oil to $127.79 a barrel. It was the biggest one-day gain since 26 March 2008.
Geopolitical volatility has not helped the situation either. Recent remarks by Israel's transport minister that an attack on Iranian nuclear sites looked "unavoidable" also helped drive prices higher.
Since last year, the price of a barrel of oil has nearly doubled in rises attributed to a weakened US dollar and increasing global demand – which has lead to riots, protests and panic-buying in many parts of the world.
Higher household bills
According to calculations from energy price comparison website TheEnergyShop.com, wholesale gas prices are now higher than retail gas prices even before allowing for the substantial costs of transportation, metering and billing.
It says that to restore the balance between wholesale and retail prices, household gas bills will need to rise by over 40% and retail electricity bills by over 20% in the next 12 months.
Joe Malinowski, founder of TheEnergyShop.com, recommends customers opt for fixed gas and electricity contracts now - and that they fix for as long as possible.“The last time wholesale gas prices broke above retail gas prices was two years ago, in June 2005. In the following 18 months energy bills rose by a record 47%. A very similar thing is going to happen this time around, except that the money value of the increase is going to be even higher,” he adds.