Brown hints he WILL will back down and axe fuel tax rise

Record pump prices from the soaring cost of oil - which reached a record $146 a barrel yesterday - have triggered huge pressure for the 2p increase set for October 1 to be put off.

Yesterday the Prime Minister pointed out to a committee of senior MPs that past increases in duty had frequently not been implemented.

Reprieve? Gordon Brown hinted the 2p-a-litre rise in fuel duty may not go ahead

'There was speculation last night that an announcement might be made this month before the vital Glasgow East by-election.

Mr Brown said rising demand for oil from booming economies in India and China would put upward pressure on energy prices for years to come.

'If demand exceeds supply and is likely to exceed supply for years to come, people will expect the price to rise,' he said.

The Prime Minister said the Government was looking for ways to help low-income families cut their fuel bills by using energy more efficiently. And he said the Government was looking to identify new sources of oil and gas to replace supplies from the North Sea that are running out. 

Mr Brown told the committee that Britain and the rest of the world must respond to the oil shock by improving energy efficiency and switching to alternative power sources such as nuclear and renewables.

Hint: Alistair Darling gestures at a press conference today. He too has suggested the fuel duty increase could be shelved

Soaring: Drivers are warned to expect petrol to rise to £1.40 within weeks

The world had a 'once in a generation opportunity' to kick its dependence on fossil fuels.

Last night the RAC said scrapping the 2p rise would make little difference and called instead for a wholesale review of Vehicle Excise Duty.

Stephen Glaister, director of the RAC Foundation, said: 'The Chancellor may pull a populist rabbit out of the hat by scrapping the October 2p rise but this will be a drop in the ocean compared to his plans to take an extra £2 billion from the road user's pockets by 2011.'

It emerged yesterday that MPs are to investigate the role of speculators driving up the price of oil, which experts predict will soon top $150 a barrel.

John McFall, chairman of the Commons Treasury select committee, said it was to hold its first hearing into the regulation of London's oil markets later this month.

The Chancellor yesterday dismissed calls for councils to be exempted from fuel duty despite warnings that services could be cut.

Soaring oil prices mean the annual cost of running rubbish trucks, gritters and other vehicles has risen from £541 million to £780million over the past two years, according to the Local Government Association.

But Mr Darling insisted that everyone was feeling the pinch.

'Many people have got obligations in both the public and private sector, and I think to do something for councils on their own would be hard to justify,' he said.

And he said the Government was looking to identify new sources of oil and gas to replace supplies from the North Sea that are running out.

'For the last 30 years, we have had oil and gas from the North Sea. That has provided a very substantial amount of the energy needs of this country,' he said.

'As the North Sea oil and gas runs down - as it is running down - we are making alternative arrangements.'

Mr Brown told the committee that Britain and the rest of the world must respond to the oil shock by improving energy efficiency and switching to alternative power sources like nuclear and renewables.

Mr Brown said the economic woes afflicting Britain were caused by fundamental global changes linked to the economic rise of China and India and their increasing demand for food and fuel and must be dealt with by international action.