The price of oil hit a record high above $135 a barrel on Thursday - more than twice what it cost a year ago.
The latest surge was driven by data showing that supplies of crude in the US had fallen by 5.4 million barrels.
US light, sweet crude for July delivery reached $135.09, taking its gain for the year so far above 40%. In May 2007 it was priced at about $65.
Higher oil prices push up the price of fuel at the garage forecourt, home energy bills, air travel and food.
The average price of a litre of unleaded petrol in the UK is now 114 pence, according to Experian Catalist, and diesel has risen to an average of 126.4 pence per litre.
Meanwhile companies have been reacting as the impact continues to feed through into the wider economy.
American Airlines has become the first US carrier to charge for checked-in luggage as it tries to increase revenue. It will also cut "thousands" of jobs.
Air France-KLM said on Thursday that the cost of oil would make the coming year "challenging".
And earlier this month, British Gas owner Centrica signalled that bills could rise again, as its profits are squeezed by higher gas and power prices.
Investment needed
UK Prime Minister Gordon Brown is working with international partners to persuade the Opec oil producers' cartel to increase supply.
His spokeswoman said that Mr Brown recognised the increases were having an effect on UK consumers and he would be raising this at the forthcoming EU and G8 summits.
But one analyst said Mr Brown's efforts were likely to prove in vain and political pressure should, instead, be exerted on leading producers to invest more in long-term capacity.
"All this excess profit that has been generated by the oil industry really needs to be invested in refineries, pipelines and oil wells," Francisco Blanch, head of global commodities research at Merrill Lynch, told the BBC.
"This is what the market is asking for at the moment and we just need to ensure... we have the political goodwill also supporting this investment."
Opec has so far blamed price rises on speculators and says there is no shortage of oil.
All but three of Opec's members are already at their maximum daily limits for oil output and pressure has grown on Saudi Arabia, Kuwait and the UAE, which do have spare capacity.
Further rises?
Some analysts have raised the possibility of prices rising as high as $200 a barrel during the next 18 months.
In addition to falling US stockpiles, the continuing weakness of the US dollar has been another factor cited as supporting prices.
The US Energy Information Administration blamed the fall in its stocks figure on a fall in imports and a pick-up in demand from refineries.
Oil prices have set new records in 10 of the last 14 trading sessions.
"You really cannot forecast how much further the market will rally now," said Tatsuo Kageyama from Kanetsu Asset Management in Tokyo.
"All I can say is the market will continue to rise."
Light, sweet crude oil is the type most commonly used for processing into petrol and as a result, it is in high demand.
It has large amounts of the content used to make petrol, top-grade diesel and kerosene. It also has low levels of sulphur.
London's Brent crude set an intra-day high on Thursday, peaking at $135.14 a barrel.
The weak dollar is thought to have played a part in the price hikes, with investors moving money into oil from other areas.
"Oil has performed better than equities and bonds," said Victor Shum from the energy consultancy Purvin and Gertz in Singapore.
"There is money looking for better returns and oil has offered better returns and continues to offer better returns."
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Oil barrels
BBC