Petrol prices push inflation to highest since April 2012

Consumer price inflation 2.9% higher than the same month last year, with upward pressure from fuel and clothing prices

Inflation in the UK has risen to its highest level for more than a year, putting a further squeeze on workers struggling with stagnant wages.

The rise in headline inflation to 2.9% will also pose a challenge for new Bank of England governor Mark Carney and his fellow policymakers as they look for ways to boost Britain's fragile recovery while keeping a lid on living costs. Still, the rate was not as high as the 3% forecast by economists and was well below the 3.1% level that would have forced Carney to write an explanatory open letter to chancellor George Osborne.

Economists warned persistently high inflation would dampen optimism about Britain's economic prospects following some recent upbeat news.

"There are growing signs of the UK recovery gaining momentum, with the economy set for strong growth in the second quarter and companies reporting the brightest outlook for the year ahead since the financial crisis struck, but inflation clearly remains the UK's bugbear and calls into question just how long this strong growth can persist for," said Chris Williamson, chief economist at data specialists Markit.

"High prices look set to continue to erode spending power, curbing the overall pace of economic growth."

The Office for National Statistics said its consumer prices measure, based on a basket of goods and services, slipped 0.2% in June from May. But compared with a year ago they were up 2.9%, the highest annual inflation since April 2012. The biggest upward pressure came from petrol and diesel prices, which both rose by around a penny this June but fell in June 2012. There was also upward pressure from clothing prices after summer sales this year did not bring as many discounts as in 2012.

The retail price index measure of inflation, used as the benchmark for many pay deals, rose to 3.3% from 3.1% in May.

Both rates of inflation markedly outstrip average UK pay growth of 1.3%, meaning real wages continue to fall.

But the Treasury welcomed the fact consumer price inflation has eased from the high hit in September 2008.

A spokesman said: "Inflation is down significantly from its peak of 5.2%. At the same time, to help families with the cost of living, the government has: increased the tax-free personal allowance to £10,000, which will take 2.4 million people out of income tax altogether and save a typical basic rate taxpayer almost £600; and frozen fuel duty which has kept petrol prices 13 pence per litre lower than they would otherwise have been."

But Labour's shadow Treasury minister Catherine McKinnell argued that after inflation, wages are down by an average of more than £1,300 since the coalition came to power.

"With prices now rising much faster than wages the cost of living crisis is getting worse. Despite all the complacent claims from ministers about the economy, these figures show that for ordinary people life is getting harder under David Cameron's government," she said.

The ONS published separate data alongside the inflation showing factory gate inflation was higher than expected in June. The prices charged by manufacturers were up 2% on the year compared with forecasts for 1.9% and ewith 1.2% in May. That came as their costs, or input prices, rose an annual 4.2%, the biggest increase for more than a year.

Economists said those numbers and a rise in the core rate of consumer price inflation, which excludes erratic items such as fuel, would raise concerns among BoE policymakers about the potential for inflation to rise further still. Bank policymakers have made it clear, however, that they will take a flexible approach to inflation targeting if the broader economic picture requires it. That potentially paves the way for more quantitative easing – pumping cash into the economy by buying bonds from financial institutions – despite above-target inflation.

Article Source : http://www.guardian.co.uk

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Petrol price rigging inquiry contacts oil traders

Glencore and Vitol among those receiving 'request for information' as part of cross-border investigation

Glencore and other big oil trading companies have been asked to provide information to the cross-border investigation into alleged petrol price rigging. There is no suggestion that these companies are being investigated.

European commission officials have asked the trading houses to answer questions related to allegations that oil companies have colluded to manipulate the price of oil and petrol for more than a decade.

Glencore, the Swiss-based commodity trader that is one of the biggest companies in the FTSE 100, and Vitol, the world's largest oil trader, are among those known to have been contacted by the commission. Glencore had previously sought to play down any links to the oil price fixing probe.

Glencore – founded by Marc Rich, a commodities trader best known for being charged by US authorities with selling oil to Iran during the 1979-81 hostage crisis - declined to comment on the record. A source close to the company said the "request for information" letter from the commission's investigators had been sent to "every man and his dog" in the oil industry and was no indication of any wrongdoing.

A spokeswoman for Vitol said: "Vitol, along with other market participants, has received a request for information from the European commission. There is no suggestion that Vitol is under investigation."

Trafigura, the world's third-largest oil trader, which hit the headlines for dumping toxic oil waste in the Ivory Coast in 2006, said the company was not aware whether or not it had received the letter from the commission.

Other oil traders, including Gunvor and Mercuria, were reported as also receiving the letter. They either declined to comment or could not be reached.

The commission declined to comment on the progress of its investigation, which was launched last week with dawn raids on the London offices of BP, Shell and oil price reporting agency Platts. Norwegian oil company Statoil was also raided. The companies said they are helping investigators with their inquiry.

David Cameron has warned that anyone found guilty of the "hugely concerning allegations" will face the full force of the law. The prime minister said the allegations were "very, very serious" and major consequences would follow as he pledged to ensure that laws passed after the Libor scandal would apply to oil price fixing in the future.

European investigators said any alleged price fixing could have had a huge impact on the price of petrol at the pumps

 "It's totally unacceptable for firms to fix prices and force consumers to pay more. That's why we are looking at how to extend this criminal offence to the energy sector to make sure that those who manipulate benchmark prices feel the full force of the law," he said last week.

The Serious Fraud Office is considering launching a criminal inquiry into the alleged price fixing, which European investigators said could have been going on since 2002 and could have had a huge impact on the price of petrol at the pumps "potentially harming final customers".

The price of petrol has risen by more than 80% since 2002 to about 135p a litre.

The commission said the big oil companies may have "prevented others from participating in the price assessment process, with a view to distorting published prices".

It added: "Any such behaviour, if established, may amount to violations of European antitrust rules that prohibit cartels and restrictive business practices and abuses of a dominant market position.

"Even small distortions of assessed prices may have a huge impact on the prices of crude oil, refined oil products and biofuels purchases and sales, potentially harming final consumers."

Luke Bosdet, of the AA, said British motorists would be relieved that the "lid is finally being lifted off the dark and murky world of oil pricing".

"Because prices are set in secret, drivers and consumers have no idea whether or not the price they pay at the pumps is a fair reflection of the wholesale price."

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Article source : http://www.guardian.co.uk