Petrol prices – do they go up or down from here?

As I drove past our local supermarket today, I noticed that petrol is now costing £1.05 per litre.

Forecourt prices have been creeping up again, but are they going to go up further from here, or start to fall?

As the price of crude oil has risen over the last few months, petrol and diesel prices have inevitably followed, and it’s starting to feel expensive to fill the car up again.

Well the days of cheap petrol and diesel have long gone – government taxes and considerations for the environment will make sure of that, probably quite rightly, but will fuel prices start to fall from here?

I’m going to put my neck on the block and say that I think they might, and here’s why.

Other than rampant speculation, oil prices are generally influenced by two major factors – general economic growth and the strength of the Dollar.

As economies emerge from the recession, activities such as manufacturing, transport and leisure increase and consume more oil.  Demand goes up, and so do oil prices.

There is generally an inverse relationship between oil prices and the strength of the US Dollar.  This is because when the dollar weakens, investors flee the currency and look to invest in other Dollar based instruments such as oil.

The Dollar has been weak for quite a few months now and that has contributed to the rise in crude oil prices, which are now at $80 per barrel, compared to around $40 six months ago.

The Dollar, however, is starting to strengthen which will start to put downwards pressure on crude oil prices.

Also the emergence from recession by large oil consuming countries such as the USA may falter in the coming months as the governments turn down the economic stimulus funding.

So I can foresee crude oil prices coming down soon.

Although there is often a lag between falling oil prices and reducing petrol prices on the forecourt, if I am correct, then hopefully it will be cheaper to fill the car up soon.

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