European biodiesel producers yesterday triggered a fresh transatlantic trade war by urging the EU to impose punitive duties on cheap imports from the US.

Low-priced imports of biofuels, as part of the so-called "splash and dash" trade, are putting many European producers out of business, industry group the European Biodiesel Board (EBB) claimed.

Their American rivals immediately hit back by urging the federal government to take action against any protective measures for the European industry.

The row comes as oil prices have risen to new highs this week at close to $120 (£60) a barrel and world food prices have surged, partly due to pressure on land from biofuels production.

The EBB said it had formally lodged a complaint to the European Commission over unfair competition from the US that was putting most EU producers out of business.

It is demanding duties on so-called B99 biodiesel exports - biodiesel with 1% petroleum diesel - claiming they are unfairly subsidised and then dumped in the EU — where they can win new subsidies.

US biodiesel exports are subsidised by up to $300 a tonne. Some trading firms have also been shipping biofuels to the US, where they add a "splash" of mineral diesel to qualify for the subsidy and then send the fuel back to the EU.

These exports have risen dramatically since last year, causing what the EBB calls "severe injury" to European producers.

Earlier this month D1 Oils, a leading but loss-making UK producer, said it would shut all its British refining operations as a direct result of lower-priced imports.

D1 said it hoped to sell the sites and equipment but said the economics of the business were now so poor that it would be lucky to make much on their disposal.

Elliott Mannis, D1 Oils' chief executive, said it was "extremely frustrating" that the company had been forced to bow out of refining because nothing had been done to stop the deluge of B99 biodiesel from the US. "It's an unbelievable situation and there is no end in sight," he added.

Brussels sources indicated that the EBB had a strong prima facie case. It is understood that Peter Mandelson, EU trade commissioner, and Susan Schwab, the US federal trade representative, have held extensive talks on the issue but failed to reach a deal.

Mandelson's spokesman said: "We've had extensive contacts with the EBB over several months. We're glad that they have finally submitted their request and will examine it thoroughly, pursuing the issue vigorously with the US. We will not tolerate unfair trade."

But Manning Feraci, vice-president of federal affairs at the National Biodiesel Board in the US, said: "It is hypocritical for the EBB to cry foul while they benefit from a blatant trade barrier."

EU biodiesel fuel specifications were discriminatory and breached World Trade Organisation rules, he said, threatening to lodge a counter-complaint with Schwab.

The EU and US are already embroiled in several high-profile and long-standing trade wars, including over beef and poultry imports from America, genetically modified seeds and foods and, above all, subsidies for rival plane-makers Airbus and Boeing.

This latest row comes as the US is stepping up biodiesel production as an antidote to dependence on imported crude, while the EU is having second thoughts about its target of using biofuels for 10% of transport fuels by 2020 because of the impact on food prices and land use.

The commission has 45 days to examine the EBB complaint and a further nine months to impose provisional duties — unless Mandelson and Schwab, desperately but forlornly trying to revive the stalled Doha round of WTO talks on trade liberalisation, can cut a deal.