It was a year of firsts for the oil industry with fuel prices gushing to record highs at the pumps and on the trading floor.

When one investment bank talked of the potential for a "super-spike" in prices to $105 a barrel, traders did not dismiss it out of hand.

During 2005, the oil industry faced a number of challenges, including satisfying China's ever-rising consumption to storm damage in the key production region of the Gulf of Mexico.

In the wake of Hurricane Katrina in August, the cost of a barrel of crude topped $70 and led to many UK motorists having to pay £1 for a litre of petrol.

Much to the relief of those dependent on oil, the rapid rate of inflation has slowed since August and is unlikely to be repeated next year.

Nevertheless, experts have warned that expensive oil is here to stay and they do not expect prices to fall far below current levels in the coming months.

The cost of a barrel of oil surged from $42 at the start of the year to a record $70.85 after Hurricane Katrina, affecting everything from the cost of raw materials to petrol forecourt prices.

It sparked a flurry of panic buying of petrol, contributed to household energy bills rising and caused many companies to pass on the higher costs to the consumer.

British Airways raised its fuel surcharge on long-haul flights for the fifth time in little more than a year in September. Its annual fuel bill of £1.6bn was its biggest expense after wages.

The International Monetary Fund estimated that a rise of $5 in oil prices slows growth in the UK by 0.1 per cent, leading economists to conclude that fuel was directly responsible for shaving 0.4 per cent off economic growth this year.

Chancellor Gordon Brown blamed a "virtual doubling" of world oil prices for the difficulties the economy has encountered when he published his annual Pre-Budget Report this month.

Mr Brown announced a raid on the profits of North Sea oil companies after fuel rises boosted the coffers of oil companies. Record results from the industry saw BP report a profits figure equivalent to nearly £1.4m an hour.

As the effect of the summer hurricanes in the Gulf of Mexico wore off, prices fell back and have spent the last weeks of the year hovering around $60.