Petrol prices could reach £2 a litre if Middle East instability escalates, Government minister Alan Duncan has warned.
The international development minister said, in a worst case scenario, where terrorists bombed oil tankers or Saudi reserves, the price of oil could rise to $250 a barrel.
That figure would mean motorists in the UK paying around £2 a litre for petrol.
In an interview with The Times newspaper, he suggested it is possible the price of crude oil could easily top the current record price of $147 a barrel reached in July 2008.
“$200 is is on the cards if… anyone is reckless and foments unrest,” said Mr Duncan, who is a former oil trader.
“I’ve been saying in government for two months that, if this does go wrong, £1.30 at the pump could look like a luxury,” he added.
However, amid fears over soaring oil prices, the Chancellor has dropped a hint that a planned 1p rise in fuel duty due next month might not go ahead.
Speaking at the Conservative Spring conference in Cardiff, George Osborne told delegates: “I know how hard the rises in world oil prices are hurting families in Britain.
“We’ve got another of the Labour Party’s pre-prepared rises in petrol tax coming this April – one penny above inflation.
“When it costs £1.30 for a litre of petrol, £80 to fill up a family car, I know people feel squeezed.
“And I say this to people watching: I hear you.”
According to The Times, Mr Duncan is the first minister to publicly raise the prospect of oil at $200 a barrel.
The price of oil rose to nearly $103 a barrel on Friday, pushed up by fears from investors that the Libyan crisis could mean a long period of reduced output from the country.
Libya’s production has fallen to about 600,000 barrels a day from its 1.6 million a day capacity.
Analysts say prices could stablise if political unrest does not spread to the major oil producing countries in the Gulf.
Saudi Arabia has increased its production to cover most of the Libyan shortfall.
Gas and electricity prices are almost certain to rise as well.
