The average UK price of unleaded petrol yesterday went over £1 per litre for the first time, as oil reached almost $100 a barrel and the dollar fell to a record low against the pound.
Industry researchers Catalist said a litre of unleaded petrol now costs 100.08p.
As well as oil prices increasing, UK duty on petrol and diesel was also increased by 2p a litre from the start of last month.
The average price of a litre of diesel is now 103.32p. Diesel broke through the £1 a litre level two-and-a-half weeks ago.
The ever-weakening dollar and fresh worries about winter fuel supplies sent US oil prices soaring past $98 a barrel.
US light crude touched as high as $98.62 in early trading yesterday, while London Brent crude also hit a new high of $95.19 a barrel.
US light crude later pulled back to $98.25 by mid-morning trading in Europe, while Brent slid to $94.89.
However, the prices were still up on Tuesday’s closes.
Analysts said yesterday that $100-a-barrel oil is now inevitable.
The dollar’s current weakness has also seen investors buying gold and other commodities.
Their prices have shot up, most notably gold, which is continuing near 27-year highs – fetching $841.75 an ounce yesterday, up $24.20 or 3 per cent.
The UK pound soared past the $2.10 level against the US dollar yesterday, a 26-year record.
At one point, sterling touched $2.1052, before falling back slightly to trade at $2.1047.
The pound was also up against the euro with £1 buying 1.4333 euros.
Meanwhile the weak dollar has seen the euro strengthening to record levels against the American currency with the euro buying $1.4704 yesterday against one euro to $1.4565 on Tuesday.
Analysts said the dollar had weakened because of speculation that US interest rates would be cut in coming months.
They also said it reflected fears that China may start offloading some of its huge dollar currency reserves that are propping up the US economy, in favour of other foreign currencies, and/or gold.
And predictions that the Bank of England’s Monetary Policy Committee may keep interest rates at 5.75 per cent today have also bolstered the pound.
Further speculation that oil-exporting nations have been selling dollars earned from petroleum sales to buy more euros, has also boosted European currencies.
The fall in the price of the dollar put pressure on global stock markets, with the FTSE 100 Index losing early gains to slide 61 points lower by midday.