Oil prices fell back from their $67 high yesterday but fears that Iran's insistence on pressing ahead with its nuclear programme could result in military action by the US or Israel kept the market bubbling.
Doubts that the oil industry can pump and refine enough crude has raised crude prices nearly 40 per cent higher this year and has resulted in pump prices breaching $2 a gallon in the States and 90p per litre in Britain.
The rally showed no real sign of letting up on Monday, even as a top economist at the International Energy Agency warned that red hot prices would damage world economic growth this year.
Analysts at PFC Energy said some were looking for oil to breach $ 70 a barrel. Adjusted for inflation that would bring it within sight of the $82 average in 1980, the year after the Iranian revolution.
Iran's determination to press on with its nuclear programme in defiance of the West has put the world's fourth biggest crude producer at risk of punitive United Nations sanctions.
It also drew strong words at the weekend from US President George W Bush, who said he would consider using force against Iran as a last resort.
US light crude was trading at $66.49 a barrel yesterday, down 37 cents, after touching a record $67.10 on Friday. London Brent crude was down 14 cents at $66.31.
The IEA said record high oil prices would cut world economic growth and widen current account gaps in rich and emerging economies.
Geoff Pyne, energy consultant for Standard Bank, said much of the recent rise was caused by fear, but added: "It is quite right to say the security of supply is not the same as it was four to five years ago."