OIL output in Britain last year was higher than at any other time since the mid-1980s.

The latest Oil and Gas Index shows in the year up to November 1999, oil output reached 2.63 million barrels per day.

Prices and revenue from oil also increased, with Brent crude rising by almost 12 per cent between October and November last year and by 120 per cent since November 1998.

Revenues in November stood at £40.4 million a day, 132 per cent higher than at the same time in 1998, with output rising by 35,000 barrels a day in that month.

Gas output increased in November by nearly a third, largely due to the seasonal demand for heating. Total gas output for the year was up by eight per cent.

Stephen Boyle, head of business economics at the Royal Bank of Scotland, which compiles the index, said the increase in output was a long term phenomenon.

He said: "It is a consequence of a steady build up in investment throughout the mid-1990s, which is now beginning to manifest itself in terms of higher output.

"It's simply a question of reaping the benefits now."

Mr Boyle said that though consumers will not see any difference in prices at the pumps, the increase in fuel prices could cause inflation and lead to higher interest rates.

UK petrol prices are dictated by the cost of world crude and by the level of taxation imposed by the Government - but the price of fuel for industry is more closely linked to the cost of British oil.

Mr Boyle added: "Although there will only be a limited effect at the petrol pump, it will feed through to the fuel costs of manufacturing and other business and could put upward pressure on inflation.

"I think it will add to the case for an interest rates rise. It could be one of the things that tips the balance."

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