Fleets are being warned to expect a significant rise in the cost of fuel in the coming weeks.

It is predicted that petrol will reach an average of £1.20 a litre in the coming days, and will hit a record £1.26 a litre by the end of the year. The previous high was £121.6 in May.

The warning comes from the Retail Motor Industry Independent Petrol Retailers Association (RMI Petrol), which said prices could increase by 3% be the end of this month and 8% by the start of 2011.

The end-of-year predictions are backed by Portland Fuel Price Protection. “Taking the rises in duty and VAT, fuel prices will already rise by 4% by the end of the year if nothing else happens,” the company’s trading manager Steve Irwin said. “So it is well within the bounds of probability that we will see an 8% rise by the year’s end. £1.25.9 for unleaded is not unreasonable to expect.”

The Government is driving much of the price increases with a 1p rise in fuel duty coming into force on October 1. There will also be a further duty rise of 0.76p on January 1, 2011.

In January, pump prices will also be impacted by the rise in VAT to 20%, and although fleets will be able to claim this back, it will still impact on cash flow.

Added to these Government-forced price increases are the predicted rises as a result of currency movements and world oil price increases.

Prices have fallen over the last couple of months, largely as a result of an improvement in exchange rate between sterling and the US dollar.

But crude oil prices have now started a sharp upward curve reaching a new three-month high of close to US$82 per barrel while sterling is showing weakness against the dollar for the first time in weeks.

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