Diesel could soon reach £1 per litre and petrol 98p per litre, as the Government's 2p increase in fuel duty comes into effect today.
The increase, which is in line with inflation, was promised earlier this year when Prime Minister Gordon Brown was chancellor.
Fuel duty will go up again in April 2008 by 2p, and by a further 1.84p in April 2009.
A Treasury spokesman said the tax rise 'sent the right signals in our fight against climate change.'
Fears about price rises
The duty rise comes at a time when oil prices are soaring - they hit a record high of $83 a barrel last week - and borrowing costs are high, too.
BP has confirmed it will definitely pass on the 2p rise to consumers, but its rivals, including supermarkets, said their prices would remain 'competitive'.
The rises have worried petrol retailers. Ray Holloway, director of the Petrol Retailers' Association, said the rise would put 'undue strain on motorists and petrol retailers alike'.
'It would not take much to push more stations out of business,' he added.
There are now fewer petrol stations in the UK than in 1912.
Hauliers concerned, too
Freight hauliers are also worried by the rises. Fuel duty on diesel in the UK is the highest in Europe at 50.35p per litre, compared with the average 22.7p per litre.
The rise in duty means the average cost of operating a 44-tonne articulated lorry will rise by £870 to £35,600.
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