The price of crude oil rocketed to a record high this evening.

It came amid fresh concerns about the state of Britain's economy, with one leading investment bank in the City warning there was a 40 per cent chance of recession.

In a further blow, official figures are tomorrow expected to show inflation rose above three per cent last month driven by rising food and energy prices.

The average price of unleaded petrol is now 118p a litre while diesel is 131.3p - although in parts of London it is even more expensive.

But with oil hitting an unprecedented $139.89 a barrel tonight, garages are expected to pass on even more increases to motorists.

Gordon Brown described oil prices as "the most worrying situation in the world" at a joint press conference with President Bush in London following talks between the two leaders.

The cost of oil has sent household energy bills soaring this year and increased costs for business. JP Morgan Chase Bank said the UK now faced the "twin demons" of recession and runaway inflation - a poisonous cocktail not seen since the early Nineties. It pointed towards falling house prices, higher borrowing costs, low wage growth and job losses, all of which will dampen consumer spending at a time of rising prices.

Mr Brown announced he would attend an international conference in Saudi Arabia on Sunday between oil producing countries and oil consuming nations.

Mr Brown said there was a growing view that the price of oil was " increasingly dependent, not just on today's demands, but on what people perceive as demand outstripping supply next year and in the long term." Oil prices are continuing to rise despite Saudi Arabia pledging to boost output by 200,000 barrels a day.

Petrol stations across London started to dry up today after a weekend of panic buying caused by a strike by haulage drivers who supply Shell stations. The director of Shell's haulage company said fuel stocks were low and hinted there was not enough time to replenish stations before Friday's next planned strike. Unite union bosses and Shell representatives were due to meet today to thrash out a deal aimed at ending the pay dispute. Unite is calling for a salary rise of £4,200 - equivalent to a 13 per cent increase.

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