The oil price soared to a record for the third day in a row yesterday, reaching $135 a barrel, more than double the price a year ago.
The surging cost of crude is increasing the pressure on petrol and diesel prices and led yesterday to renewed calls for the government to scrap planned rises in fuel duty.
The latest surge came as the CBI, the employers' body, warned that an increasing number of manufacturers were planning to raise prices despite falling order books, adding to inflationary pressures and making further cuts in interest rates less likely.
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The US has repeatedly called for oil-producing countries to raise output to calm the market but producers blame speculators and the weakness of the dollar for high prices, rather than supply constraints.
Abdullah al-Badri, Opec secretary general, said the cartel saw no problems with the fundamentals of oil supply and demand. "Even if we increase output tomorrow, the prices will not come down."
Libya's leading oil official, Shokri Ghanem, told Bloomberg TV: "It is out of our hands. $200 a barrel is not logical but even $135 is not logical, so yes oil could reach $200 a barrel. Why not?"
Though the price slipped back from the new record in later trading as the dollar strengthened, analysts believe it will push higher.
"The combination of increasing demand and constricted supply will continue to keep oil prices strong," said Robin Batchelor, manager of BlackRock's BGF World Energy fund, in a research note.
The latest surge in prices has been driven by fears about supplies after the US Energy Information Administration said crude oil stockpiles had fallen last week, contrary to market expectations.
In Britain, the AA motoring organisation warned yesterday that drivers would have to spend £110m more on fuel over this year's bank holiday than over last year's. Average petrol prices have risen to 112.5p a litre while diesel costs an average 124.17p.
Britain's energy suppliers are expected to increase prices to domestic consumers because of rising wholesale gas and electricity prices. Joe Malinowski at TheEnergyShop.com, the online price comparison and switching service, warned: "Prices are going up and they are going up significantly."
Malcolm Wicks, the energy minister, said the government was talking to oil-producing nations to help curb rising prices.
"Talking to the energy producers is the key thing," he said. "We are doing that in a number of forums. We need a better relationship between the consuming countries for oil and the producers, and I'm confident we will get it, but we are living in difficult times," he told the BBC.
"All of us in Britain and Europe have got to put much more emphasis on energy efficiency and I think these high prices may have the impact of making us all take energy demand and energy efficiency seriously."
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