A Northern Territory councillor says a dramatic rise in the price of diesel has the potential to cause riots in the town of Wadeye.

Victoria Daly Shire councillor Andrew Brown, representing the Thamarrurr Pindi Pindi Ward, says the diesel price at Wadeye has risen to $3.66 a litre in the past two weeks.

He says this is a rise of almost a dollar in the past few months.

He says the price of unleaded fuel is $3.33, up by $1.50 from six months ago.

Mr Brown says the fuel price rise has the potential to bring the community of about 1,800 people to its knees.

Wadeye, formerly known as Port Keats, is about 230 kilometres south-west of Darwin by air and 400 kilometres by road.

Mr Brown says tempers will be raised in the town and the price rise could result in local people not being able to drive their vehicles.

"I think somebody should probably be looking in from the Government just to make sure this is all above board and find out just why this is happening," he said.

"What will happen now is fuel stealing will be rampant.

"The old people will just have to walk now, I suppose."

Wadeye, the largest Indigenous town in the Territory, has been relatively quiet since regular clashes between two rival gangs, Judas Priest and Evil Warriors, erupted in 2007 and lasted for several years.

The Territory's Automobile Association (AANT) says it cannot see any justification for the jump in fuel prices at Wadeye.

AANT general manager Edon Bell says any rise should be based on the terminal gate price of fuel.

He says this is sitting at about $1.50 a litre.

"It has been relatively flatline since December; in fact it has been slowly reducing," he said.

"To hear about an increase of that scale ... I would be calling on the operators of the site to be providing clear justification to the community."

The ABC has contacted the Thamarrurr Development Corporation, which operates the Wadeye fuel station, for a response.