FAMILIES started to feel the pinch from record oil prices last week as petrol went above £1 a litre for the first time, and analysts warn utility bills are to rise too.

Crude ended the week at $96.36 a barrel, just shy of the record $98.62 (£47) it hit on Wednesday, but analysts believe momentum could take it above the $100 barrier in the coming days. The oil price is now within striking distance of the $101 it reached in real terms in 1980, after the Iranian revolution – though the nominal price then was just $39.

Jeffrey Currie at Goldman Sachs, the investment bank that was one of the first to predict $100 oil, said: “Prices could well trade above their previous peaks in the short term as cold winter weather and geopolitical tensions exacerbate supply shortages.”

Families are already paying £4 more a week for their petrol than a year ago, and they were warned last week that utility giants are preparing to increase energy bills – even though they failed to cut them when fuel prices were lower earlier this year.

Mark Todd of Energyhelpline, a consumer watchdog, said: “We are expecting increases of more than 10% in the next six months. With suppliers having failed to pass on price falls from last year, this won’t be justifiable.”

It is not all bad news, though – there are several ways to cut your bills, and investors are being offered more ways than ever to profit from the commodities boom.

Save £460 at the pumps

Motorists have seen the average price of unleaded petrol leap 20% from 86p this time a year ago to 100.3p last week, while diesel is at 103.7p.

The website petrolprices.com allows you to find the cheapest fuel within 10 miles of your postcode. In some cases, the difference can be as much as 14p a litre.

The Bowbridge garage in Mackworth, Derbyshire, for example, was charging 109.9p a litre last Friday, but only 3.3 miles down the road at the Somerfield garage in Darley the cost was just 95.9p. A family with two average cars, that typically spends £2,740 a year on petrol, could save £384 if they went for the cheaper option, according to the AA.

You should then use a cashback card to buy your fuel. The Shell Mastercard from Citi, for example, offers a 3% discount on fuel purchased at Shell garages, and 1% anywhere else. The money is normally credited to your account at the end of the year.

However, Capital One’s World cashback card offers an even better deal. It gives 4% cashback for the first three months and 1% thereafter. This would save an additional £77.60 over the year in the above example, according to Moneysupermarket.com, a price comparison site – a total saving of £461.

Prepare for higher heating bills

Wholesale gas prices jumped 35% between the beginning of September and the end of October on the back of rising oil prices, but utility firms have not passed on the rises – yet.

Consumer groups think it is only a matter of time before firms such as British Gas put up their tariffs, so families are being urged to snap up a good deal while they still can.

The cheapest deal on the market at the moment is from British Gas, with an annual bill of £742 on its Click Energy 4 tariff.

It could also be an opportune time to switch to a fixed or capped product to protect from any further price hikes.

Scottish and Southern Energy’s Price Fix 2008 is fixed until November 30 next year at an average of £742.53 – roughly the same as the British Gas deal.

Back the oligarchs and the mounties

While analysts believe there is a good chance oil could surge above $100, it is not expected to stay there for long. Goldman Sachs thinks the price will be back down to about $80 by next spring, while Lehman Brothers, another investment bank, is expecting it to fall to about $74 – although that is still above the $40-$60 range predicted only a year ago.

Advisers therefore say that while this is probably not a good time to bet directly on the oil price, you should buy into producer nations that will be feeling the effects of high oil prices for several years to come.

Thanks to the oil price, Russia now has the world’s third-largest currency reserves, worth more than $430 billion (£205 billion), and is funnelling surplus oil revenues into infrastructure projects, higher pensions and public-service salaries. Mark Dampier of Har-greaves Lansdown, an adviser, recommends the Neptune Russia and Jupiter Emerging European Opportunities funds.

Alternatively, Alberta, Canada, has 30,000 square miles of tar sands – the largest deposit outside the Middle East – and Shell is mining the Athabasca oil sands to extract 500,000 barrels a day for the next 50 years.

It is just as easy to buy North American shares as it is to buy UK ones, so consider Suncor Energy and Husky Energy on the Toronto exchange. Or you can get exposure to Canada via JPM Natural Resources, which has 36% of the fund there.

Put your money with the giants

Many analysts believe BP and Shell look good value compared with many of their competitors. They are trading on price/earning ratios of 11.9 and 10.5 respectively, against 26.7 for rival Tullow Oil. BP’s share price has risen 6% this year and closed at 598.5p on Friday, while Shell is at £19.82.

If you want something more racy, you could look at smaller exploration companies that could be takeover targets, such as Dana Petrolem – or a fund such as CF Junior Oils Trust.

Go for gold

The gold and oil prices are not directly linked but tend to do well when the dollar is falling. Gold hit $841.1 an ounce last Thursday and is not far from its record high of $850 an ounce in 1980.

The easiest way to buy gold is via an exchange-traded fund or managed funds such as Blackrock Merrill Lynch Gold and General or JPM Natural Resources.

Justin Urquhart-Stewart of Seven Investment Management recommends that investors should wait for the price to drop back.

WHAT $100 MEANS FOR OIL STOCKS

WITH oil, gold and the pound at record levels and the global economy heading for a slowdown, many commentators are raising the spectre of the 1970s. We answer your questions on what it all means.

Why has the oil price risen so much?

Global demand is strong, particularly from the emerging markets of India and China, and at the same time supply is tight.

The disputes between Iran and the US, and Turkey and the Kurds in northern Iraq, have also threatened the supply chain and pushed crude higher.

However, analysts said speculation is pushing the price higher than the fundamentals support.

Goldman Sachs, an investment bank, thinks it will drop to $80 a barrel by next spring, although it could go above $100 before it starts to fall back.

What does it mean for the stock market?

While the high oil price caused a stock market crash in the 70s, this seems unlikely this time round Ted Scott, manager of F&C’s UK Growth & Income fund, said: “The sharp rise in the price of oil in recent months has not affected equity markets as much as it has done in the past. Oil is a less significant part of the economy than it was in the 1970s and unlike then, inflation has also been kept under control.”

The weak dollar should also help support the stock markets as it will be a boost for international firms and US exporters.

What will the oil price mean for interest rates?

Ben Bernanke, chairman of the US Federal Reserve, said last week that the sharp increase in oil prices has put renewed pressure on inflation and economists believe it will rise in the States and here in Britain over the coming months. However, they do not believe that the Bank of England will have to put interest rates up to curb inflation.

Keith Wade, economist at Schroders, an investment house, said: “A rise in oil prices acts like a tax increase, so it will cause a slowdown in economic growth and consumer spending without interest rate rises. There are already signs that the economy and housing market are slowing.”

Most economists believe interest rates will start falling again next year, with many forecasting a quarter-point reduction in February. Wade believes there will be two further cuts in May and August, which would take Bank rate back down to 5%.

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