Motorists were yesterday warned by the chief of BP that petrol may soon cost £1 a litre in the UK after crude oil prices hit record highs this month.
Unveiling pre-tax profits of $5.27 billion (£2.95 billion) in the first quarter, Lord Browne told the City that oil prices would remain strong due to disruption of supplies from Nigeria and concerns over a political stand-off with Iran.
Oil prices averaged $61.79 per barrel in the first quarter - up nearly $5 on their level at the end of 2005 and more than $14 higher than the corresponding period of last year.
With large stockpiles of crude and increased output by Opec failing to take the steam off the market, the cost of crude oil hit a new high above $75 a barrel this month.
Lord Browne said demand for oil was unlikely to slip as the US economy appeared to have rebounded in the first quarter, with Europe recovering and Asia and Latin America growing in line with recent trends.
The cost of a litre of unleaded petrol at BP filling stations yesterday averaged 96.4p, while the AA Motoring Trust said the price of diesel in the UK fell short of a new record by one hundredth of a penny.
A spokesman for BP said: "Inevitably, rises in crude oil prices will be reflected at the pumps." In his assessment of the outlook, Lord Browne pointed out that the profitability of BP's petrol stations around the world was lower than a year ago.
An initial improvement in retail margins reversed as the quarter went on, to show an overall decline compared with a year earlier, he said. "A further rise in wholesale gasoline and crude prices is evident in April and marketing margins are expected to remain volatile," Lord Browne said.
BP was unable to capitalise fully on high oil prices to improve profits after it felt the effects of storm damage to rigs and the shutdown of its biggest refinery.
Profits totalled $5.27 billion (£2.95 billion) between January and March compared with $5.49 billion (£3.07 billion) a year ago.
Hurricanes knocked out its Thunder Horse rig in the Gulf of Mexico and production has yet to be restarted, contributing to group output falling below last year.
Daily production during the quarter totalled 4.035 million barrels of oil compared with 4.101 million a year earlier.
The company's TNK-BP joint venture in Russia was also affected by an unusually cold winter.
In its refining business, BP said that its Texas City refinery in the United States was operating again at a limited level after hurricanes and a fatal fire forced its closure last year.
The company added that its tax rate for the year was expected to be around 39 per cent as it waited for an additional levy on North Sea oil production proposed by Chancellor Gordon Brown in his pre-Budget report to be enacted.
This new policy will create a one-time deferred tax charge of $600 million (£335.8 million) and a secondary impact will be to raise the ongoing tax rate by two per cent, BP said. ..SUPL: