The nightmare scenario of oil reaching $500 a barrel within a few years was raised at the weekend by a member of OPEC's governing council.

It would mean a fourfold increase from current prices and ends any hope the ECB has of getting inflation under control.

Such a rise would also pose a serious threat to economic growth in oil importing countries.

Iran's OPEC governor Mohammad Ali Khatibi has warned oil prices could reach as high as $500 per barrel in a few years' time if the US dollar falls further and political tension worsens.

"If the dollar's value continues to decrease and if the political crisis becomes worse, the oil price would reach up to $500," Mohammad Ali Khatibi said in an interview published on Saturday.

"If there is another war in the region, it will not only be Iran's oil not reaching the market, but rather the oil of the whole region would be cut from the market," Khatibi said.

"In that case, we will not have a price rise. We will have a price explosion."

Mr Khatibi made the comments in response to a query about the possibility of oil reaching just $200 per barrel in the next two or three years.

Iran gets daily revenue of about $300m from exports of crude oil, exporting some 2.5 million barrels of oil a day at an average price of $120, according to the Iranian oil ministry

Attempts by some producing countries, like Russia, to trade oil in euros rather than dollars have found little support, with middle eastern countries that dominate OPEC more than happy to continue using the US currency.

Oil dropped $2 to a fresh seven-week low of just over $123 a barrel on Friday, continuing a decline that has knocked more than $24 off crude in two weeks.