Oil prices climbed to their highest level in 30 months in London today as Libya's uprising reduced shipments and sparked fears of unrest spreading across the Middle East.
Brent crude hit $119 a barrel for the first time since August 2008, while benchmark crude for April delivery on the New York Mercantile Exchange was up nearly four dollars at $101.67.
Major Western oil companies, such as Italian firm Eni and Spain's Repsol-YPF, have suspended production, while British giant BP has evacuated staff.
Ongoing fears over the impact of soaring oil prices on economic prospects meant the FTSE 100 Index fell by one per cent at one stage today.
Meanwhile, a group of petrol retailers predicted the rise in Brent crude will filter through to British forecourts in the next few weeks, leading to an estimated 5p per litre increase by April 1.
Brian Madderson, chairman of RMI Petrol, the petrol retailers' association, said it is “further bad news for motorists and forecourts as this increase looks set to coincide with the introduction of the previous Government's ill thought-out fuel duty escalator adding a further 5p per litre at the pump - in total a 10p-per-litre jump”.
Some analysts fear Nymex crude could break its 2008 record of around $147 if the political unrest spreads to countries such as Iran and Saudi Arabia.
Michael Hewson, an analyst at CMC Markets, said oil prices were being pushed up by a combination of restricted production and speculation.
"There has been disruption to production - but Libya accounts for only two per cent of the world's oil supply," he said.
"However, Europe takes about 50 per cent of its oil from Libya and will have to source oil from elsewhere and possibly pay more for it.
"The real concern is that Opec (Organisation of the Petroleum Exporting Countries) won't be able to step up production if the contagion spreads to Saudi Arabia. Libya is just one piece of the puzzle."
Hewson said investors were also concerned that Algeria and Iran could be dragged into the turmoil spreading across North Africa and the Middle East.
He said many of the predictions for oil prices - some suggesting it could hit $220 a barrel - were "outlandish".
The unrest has spread from Tunisia and Egypt, but Libya is the first major oil exporter to be hit by the turmoil.
Hundreds of Libyans have been killed in violent clashes between anti-government protesters and forces loyal to dictator Colonel Muammar Gaddafi in recent days. Col Gaddafi is refusing to relinquish power, vowing to fight to his "last drop of blood".
Libya is the world's 12th largest exporter of oil and Barclays Capital estimates about one million barrels per day of production has been shut down.
The International Energy Agency (IEA), an independent organisation which works to ensure stable supply of energy to its 28 member countries, said it was "ready, as always, to make oil available to the market in the event of a major supply disruption".