Fresh Fears of $100 a Barrel Oil

British Chancellor Gordon Browns economic growth forecasts stand no chance of being met because of surging oil prices, a leading forecaster will warn on Monday. In a report that will fuel widespread fears in the City of a further spike in the price of oil, the Ernst & Young Item Club will warn of dire consequences for the economy if oil hits $100 (Pounds 55, E82) a barrel.

The Item Club report The Economic Impact Of $100 Per Barrel Oil Prices says inflation could hit 4% and economic growth collapse to 1%. Peter Spencer, chief economic adviser to the club, said: If oil prices stay at $65, or even rise to $100, it would be politically impossible for the Chancellor to push up duty from current levels, triggering further fuel blockades. He might even struggle to avoid cutting fuel duties. Brown is still officially forecasting growth of 3% to 3.5% this year, but this is rejected by all independent economists.

The report comes as ministers from oil cartel Opec meet in Vienna on Monday to discuss a near-2% increase in its official production quotas. They are expected to say on Tuesday they are ready to raise the ceiling, but the move is unlikely to have any long-term effect on prices. A 500,000 barrels-a-day hike in the existing official 28m bpd ceiling would merely formalise much of the cartels existing output, believed by analysts to be closer to 28.6m bpd for the 10 members, excluding Iraq, which have production quotas. Including Iraq, Opec is believed to produce 30.5m bpd.

The euro zone is expected to grow by some 1.3% this year, according to a poll of top institutions conducted by MJ Economics.

Forecasts for private consumption and fixed investment have slipped, according to the survey, while the impact of high oil prices is more clearly visible in forecasts for the current account surplus, which have been cut sharply in recent months.