Oil traders in London are to be dragged into a worldwide investigation amid increasing concern among regulators and politicians that the market is rigged.

The Financial Services Authority is linking with watchdogs in Europe and the US to probe suggestions that teams of unscrupulous traders are driving oil prices higher, damaging business and hurting consumers.

America's Commodity Futures Trading Commission, until now a low-key regulator, has upped its profile in response to fears that the oil market is spinning out of control.

With some analysts predicting prices could rise to $200 a barrel within the next two years, officials are worried that the normal laws of supply and demand have been suspended.

The CFTC has taken the unusual step of announcing that an investigation has begun in an attempt to pacify anxious politicians. Bart Chilton, a CFTC commissioner, said: "It's important that people who are paying high gas [petrol] prices understand the CFTC is on the case and that we're closely monitoring, and in this instance deeply investigating, any potential abuse."

Traders will be ordered to give daily information on positions they have taken in the oil futures market - a field that has tended to fly beneath the radar of financial regulators.

The concern is that some investors have taken such heavy positions that they now have a vested interest in keeping prices high by spreading fears that demand for oil is likely to outstrip supply in the near future.

The CFTC and the FSA are to analyse data from the New York Mercantile Exchange and the IntercontinentalExchange (ICE), which owns the London exchange, to see if traders are taking positions that exceed normal dealing patterns.

ICE chief executive Jeffrey Sprecher concedes he is under pressure to persuade the world that the market is not being manipulated. "We are in extraordinary times," he said.

The oil price slipped 77 cents to $125.85 a barrel today, but is expected to remain well above $100 for the foreseeable future. In Britain and elsewhere, truck drivers andmotorists have been protesting that petrol prices are out of control. The CFTC is understood to have begun its investigation six months ago. It is also demanding traders follow new rules designed to increase the transparency of the energy futures market.

Analysts say the probe could help drive oil costs lower, at least in the short term, as traders grow nervous about placing large bets on high prices in case they become the focus of the inquiry.