Ian Paisley Jnr has claimed that a quarter of all diesel sold from Northern Ireland forecourts is smuggled.
During a House of Commons debate, the North Antrim MP said more must be done to tackle the growing problem of fuel laundering.
Mr Paisley said there is a need for new measures that can properly and permanently mark diesel for non-road use, so that it cannot be stripped of this marking and then sold as counterfeit.
He said: "A recent HMRC (Her Majesty's Revenue and Customs) report on measuring tax gaps has revealed that smuggled diesel has increased in the last year, moving from 12% of all diesel sold to 25% this year."
He said it was a "staggering increase" and demands that action is taken.
"Currently the practice of laundering diesel not only robs the Treasury of huge amounts of revenue but also has a very detrimental environmental impact, with the criminals engaged in the practice often dumping the toxic sludge produced in this process in the countryside.
"It is vital that HMRC pursues this issue as a matter of high importance."