Supermarket chain Safeway has become the second major petrol retailer to raise its prices, in a sign that British motorists will face higher fuel bills in the New Year.

Safeway said it would put up pump prices by an average of 2p per litre from 1 January, taking the average price of a litre of unleaded to 74.9p.

The move came after petrol retail giant BP confirmed it was increasing petrol prices by 1p to an average of 74.8p a litre.

The higher pump prices reflect a sharp jump in the price of crude oil amid fears that a US-led war against Iraq could disrupt fuel supplies from the Middle East, the world's biggest oil exporting region.

Crude pricing

Production cuts in Venezuela, where a month-long strike has paralysed the oil industry, have also helped to drive crude prices higher.

World oil prices broke through $33 (�20.5) per barrel on Monday, their highest level since December 2000.

Analysts said the strong crude oil market is likely to push other major petrol retailers into raising their prices in turn.

"If prices stay up, then inevitably we will see price increases at the pumps, although oil companies do try to smooth it out," said Hilary Cook, director of investment strategy at Barclays Private Clients.

Oil producers' cartel OPEC is thought to be ready to raise output if crude prices do not drop within the next two weeks.

Fuel bills

However, the extra production is likely to take several weeks to reach the international market.

The increase in British pump prices are likely to exacerbate consumer resentment over high fuel bills.

British petrol prices are already among the highest in Europe because of hefty fuel duties.

Two years ago, blockades by angry truck drivers protesting against fuel duties disrupted petrol deliveries across the country, causing massive disruption.