Petrol prices will hit €1.60 within weeks
FUEL prices are about to hit record levels with the EU's new oil embargo on Iran.
Experts have predicted that the price of petrol could increase from €1.55 a litre to €1.60 in coming weeks.
However, they say the spike will be gradual and not as bad as some had initially feared.
Petrol and diesel prices have already risen to unprecedented levels this month following the December Budget hikes.
Struggling households will now feel further strain on their budgets, as the EU confirmed an immediate ban on all new oil contracts with the Gulf state.
Existing contracts will be allowed to continue until July 1 to give time to countries reliant on Iranian oil to find other suppliers.
The EU's decision aims to sanction Iran for its ongoing nuclear programme. It prompted Iran to threaten closing the Strait of Hormuz, in the Persian Gulf, a "chokepoint" for a fifth of world oil exports.
Oil prices edged up 94 cents to $110.80 a barrel yesterday.
Tanaiste Eamon Gilmore admitted the embargo was likely to provoke price hikes.
"There are clearly practical difficulties with the proposals, some of which will impact on the price of oil, but we have to weigh that against the huge danger that is posed to the peace and safety of the world by the increased militarisation of the nuclear industry in Iran," he said.
The EU currently imports about 600,000 barrels of Iranian oil daily. Motorists in Ireland were already facing a considerable hike in their fuel bill as the price of petrol rose by 7pc between December and January, and diesel by 6.2pc.
Part of the increase was the result of the Government increasing VAT on fuel at the start of the year -- a fifth tax increase in the past four years.
The budget notably increased VAT on petrol from 21pc to 23pc this month. It also added 1.4c in carbon tax for petrol and 1.6c for diesel. The euro weakening against the dollar and the increase in wholesale prices also contributed to the price increases.
AA spokesman Conor Faughnan said petrol prices were now expected to rise to €1.60 per litre in coming weeks, while Bord Gais power trader John Heffernan also warned that gas prices may rise as a result.