SIR RICHARD BRANSON is to put $100 million (£55 million) behind his plan to build an oil refinery for airline fuel.

The Virgin founder is to launch a new company called Virgin Oil within four or five months and is seeking to attract funding from other airlines and the Government.

He has held informal talks with Willie Walsh, the incoming British Airways chief executive, about the proposals. Virgin has also approached the Government over the plans and Sir Richard is hoping that those discussions will lead to talks with Gordon Brown.

Sir Richard is planning to build a $2 billion oil refinery in an attempt to beat the global surge in oil prices, lower the price of jet fuel and, in turn, reduce the price of an airline ticket.

A team of oil specialists has been working on the Virgin refinery plan for the past five months. The Virgin boss told The Times last night that a new refinery would take three to four years to complete.

“The big oil companies are making extortionate profits out of the current oil price,” Sir Richard said. “The biggest problem with the oil price is the lack of refinery capacity. There is enough oil for everyone in the world, but the refineries are just not there. There has been talk of a windfall tax on big oil companies. Perhaps the Government should use that money to invest in refinery infrastructure.” Virgin is looking at several locations around the world, including Nigeria and Britain, to build the refinery. Sir Richard believes that it is more likely that the venture will be based in Europe.

Sir Richard also indicated that the Virgin team is drawing up plans for an oil exploration business. “We think there are ways of extracting oil from small fields that the major oil companies do not touch because they are not economical,” he said. He believes that as many as ten new refineries are needed to alter the price of oil and sustain lower prices.

The International Air Transport Association (IATA) believes that the global airline industry will report losses of $7.4 billion for 2005 because of the rising price of oil. Fares charged by British airlines jumped by 6.3 per cent in August from the previous month and have soared by 9.2 per cent from the same time last year. Virgin increased the fuel surcharge for every flight to £30 from £22 because of the rising oil price.

“Our fuel bill has risen by $300 million for this year alone,” Sir Richard said.

• Fears over the economic impact of soaring energy costs and Hurricane Katrina have triggered an abrupt drop in confidence in global prospects among investment managers worldwide. A poll by Merrill Lynch found that more than half of fund managers at leading institutions believe world economic conditions will deteriorate over the coming 12 months. The signs of growing pessimism came as the rising cost of petrol on the nation’s forecourts helped to drive the Bank of England’s main measure of inflation further above target, to its highest levels since the start of 1997. The City predicted that inflation would climb still higher and said that the news undermined the chance of more cuts in interest rates.

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