It has also asked for the Competition Commission to begin an inquiry into how the energy market can be more efficient for customers, before asking ministers to force suppliers to offer their lowest deals to those struggling with fuel poverty.
Allan Asher, chief executive of energywatch, said: "Rampaging oil prices are a serious and global contagion.
"That does not mean we should just take to our beds and hope that the fever will pass. Government can and should act in those areas where it can have an effect."
Earlier this week, energywatch welcomed the government's plans to increase the amount of information available to consumers in the UK about green tariffs.
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