BRITISH businesses and motorists face further rises in fuel costs as record dollar prices are heightened by the US currency’s sudden rise against the pound.

Hurricane Dennis, the strongest on record for so early in the Caribbean storm season, has given a new twist to spiralling upwards dollar oil prices. Markets have failed to retreat from records reached in the Spring. The benchmark futures price for Brent crude set a new record on Friday above $60 a barrel.

The hurricane has prompted evacuations of oil and gas facilities in the Gulf of Mexico, an area that normally delivers 1.5 million barrels a day of oil, a quarter of US production. The stoppages are likely to be brief, but they come at a time when demand is buoyant and production near to capacity limits.

Americans are buying 2.7 per cent more petrol this year than last, against forecasts of a 1.2 per cent rise, even though pump prices have risen sharply. A further shortage could encourage US distributors to import unleaded petrol from Britain.

The dollar price of oil has leapt by more than 11 per cent in the past month and by almost two thirds over the past year. Yet the impact of this rise is being exacerbated by a 5 per cent fall in sterling’s dollar exchange rate in the past month, which has accelerated in recent days.

Priced in sterling, crude oil has risen by one sixth in the past month and by three quarters in the past year. Traders are buying dollars because they expect that US interest rates will keep climbing, while British rates are set to fall soon.

Economists predict that sterling will slide further against the dollar. They expect that the oil price will remain high, increasing the British industrial fuel costs and the prices of petrol and diesel at forecourts. Similar problems confront the eurozone, where a recent drop in the euro is exaggerating the impact of dearer oil.

Leo Drollas, chief economist at the Centre for Global Energy Studies, said that, until recently, some of the toll from rising oil prices on Britain and the eurozone had been relieved by the strength of their currencies against a relatively weak dollar. “For the UK and for the Continent, the stronger dollar is going to put some pressure on local prices,” he said.

Mr Drollas highlighted the risk of a potential vicious circle. Higher fuel costs could hit growth, leading to interest-rate cuts that further weaken the pound or euro, in turn adding to the oil-price effect.

Economic analysts expect oil prices to retreat a little in coming months, although not by much.

Most have raised their price forecasts, so that the consensus view is for Brent crude to average $49.78 a barrel this year. On US futures markets, however, higher prices are predicted. Traders are betting on no fall in dollar prices before February 2007.

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