Police reported that 43 people were hurt in what appeared to be an accident at the Buncefield depot near the town of Hemel Hempstead, about 40 kilometres northwest of London just, after 6 am (0600 GMT) on Sunday.
Witnesses described a series of massive explosions shooting flames hundreds of metres into the air followed by a huge plume of billowing smoke.
Jittery from deadly bombings in the British capital in July, residents and workers in the rural are initially feared a terrorist attack or a plane crash linked to nearby Luton Airport.
“It’s like it’s doomsday,” witness Richard Ayres told British media just after the first blasts occurred.
Dave Franklin, who lives about a kilometre from the depot, told BBC television he was woken up by “an absolutely massive loud bang”.
“It actually broke two windows in the flat above us. There are just flames everywhere. The whole sky has just turned orange and black,” he said.
The explosions tore walls off buildings in a nearby industrial park, smashed windows and dented doors of homes, ripped tiles of house roofs, and burned at least half a dozen cars, news agency AFP reported.
Fires and explosions continued hours later, feeding a plume of thick black smoke that drifted south-eastwards over London.
Dozens of residents were evacuated.
Officials expected the fire to burn for at least 24 hours before it could be brought under control.
Hertfordshire Police’s Chief Constable Frank Whiteley said of the 43 people hurt most had minor injuries.
However, a hospital official said one person’s condition was serious – though not critical — as a result of lung damage from the impact of the blast.
The police chief said it was “miraculous” there had been no mass casualties, adding that many people might have died if it had occurred on a busy weekday.
Blasts ‘an accident’
Constable Whiteley promised a full probe into the blasts at the depot, the fifth largest fuel distribution centre in Britain.
“All indications at this stage are that this was an accident. However, clearly we will keep an open mind until we can confirm that for certain,” Mr Whiteley told a press conference.
Police said about half the plant had been destroyed in the explosions. They closed the nearby M1 motorway in both directions, causing traffic chaos.
Hertfordshire Fire Chief Roy Wilsher told reporters it might have been the largest oil depot explosion in peacetime Europe.
The depot, which distributes aviation fuel to airports in the London area, is run by the British arm of French oil company Total and Texaco, part of US oil giant Chevron Texaco.
Officials said the explosions were unlikely to cause fuel shortages and urged motorists to avoid panic buying of petrol.
A government spokesman said that when full, the depot holds five per cent of Britain’s oil supply, but could not say how much it was holding before the blast.
He said oil industry chiefs were meeting to work out how to guarantee supplies from other distribution terminals.