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Grangemouth supplies 10 per cent of the UK's petrol but also produces power for BP's Kinneil plant, which processes the oil from the Forties pipeline.

The oil price was also supported by concern over a surge in violence in oil-rich southern Nigeria, which led to five policemen being shot dead on Sunday.

Attacks by militia forces forced Royal Dutch Shell and ExxonMobile to shut down oil production temporarily two days ago.

Traders were also spooked by continued tensions between the United States and Iran, the world's fourth-largest oil producer.

A cargo ship hired by the US Navy fired on Iranian forces on Friday.

The rise in oil prices comes despite a 400,000 barrel-a-day reduction in physical demand from the United States, which is consuming less because of its economic slowdown. This has been more than offset by rising financial demand as funds seek alternative investments to the falling US dollar.

Analysts fear that the price will rise even higher as supply shortages get worse in the coming months while both physical and financial demand increase.

On the supply side, shortages may occur if there is a bad hurricane season in the Gulf of Mexico and because the oil industry typically saves maintenance work at fields such as the North Sea for good weather.

Summer usually brings a rise in demand as air-conditioning use rises, particularly in the Middle East.

Rapid economic growth in the region has led to a large increase in energy consumption, which is diverting oil and gas away from export markets to feed domestic needs.

This has exacerbated the effect of rising energy demand in the region.

The high price of oil is already having an impact on the global economy, with airlines going bust and drivers paying more to fill their cars.

Eos, the business-class-only airline, went into Chapter 11 bankruptcy protection yesterday and joins at least six other carriers that have also been grounded in the past two weeks by high costs.

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