• The US has been exploring a potential ban with allies as a way of punishing Russia for its invasion of Ukraine.
• In an address on Russian state television, Mr Novak said it would be "impossible to quickly find a replacement for Russian oil on the European market".
Russia has said it may close its main gas pipeline to Germany if the West goes ahead with a ban on Russian oil.
Deputy Prime Minister Alexander Novak said a "rejection of Russian oil would lead to catastrophic consequences for the global market", causing prices to more than double to $300 a barrel.
The US has been exploring a potential ban with allies as a way of punishing Russia for its invasion of Ukraine.
But Germany and the Netherlands rejected the plan on Monday.
The EU gets about 40% of its gas and 30% of its oil from Russia, and has no easy substitutes if supplies are disrupted.
In an address on Russian state television, Mr Novak said it would be "impossible to quickly find a replacement for Russian oil on the European market".
"It will take years, and it will still be much more expensive for European consumers. Ultimately, they will be hurt the worst by this outcome," he said.
Pointing to Germany's decision last month to freeze certification of Nord Stream 2, a new gas pipeline connecting the two countries, he added that an oil embargo could prompt retaliation.
"We have every right to take a matching decision and impose an embargo on gas pumping through the [existing] Nord Stream 1 gas pipeline," he said.
Russia is the world's top producer of natural gas and second top producer of crude oil, and any move to sanction its energy industry would badly damage its own economy.
Ukraine has implored the West to adopt such a ban, but there are concerns it would send prices soaring. Investor fears of an embargo drove Brent crude oil to $139 a barrel at one point on Monday - its highest level for almost 14 years.
Average UK petrol prices also hit fresh record of 155p a litre.
Quoting unnamed sources, Reuters news agency reported that the US might be willing to move ahead with an embargo without its allies, although it only gets about 3% of its oil from Russia.
However, on Monday, German Chancellor Olaf Scholz dismissed the idea of a wider ban, saying Europe had "deliberately exempted" Russian energy from sanctions because its supply could not be secured "any other way" at the moment.
European powers have, however, committed to move away from Russian hydrocarbons over time, while some Western companies have boycotted Russian shipments or pledged to divest their stakes in Russian energy companies.
Mr Novak said that Russian companies were already feeling the pressure of US and European moves to lower the dependence on Russian energy, despite fulfilling all its contractual obligations to deliver oil and gas to Europe.
"We are concerned by the discussion and statements we are seeing regarding a possible embargo on Russian oil and petrochemicals, on phasing them out," he said.
"We see our partners, traders, shipping companies, banks and financial institutions coming under enormous pressure."
His comments came as a third round of peace talks between Ukraine and Russia made little progress in Belarus.
More than 1.7 million Ukrainians have fled to Central Europe since the conflict began on 24 February, the United Nations refugee agency said on Monday, with over 1 million arriving in neighbouring Poland.
Kremlin spokesman Dmitry Peskov told Reuters Moscow would halt operations if Ukraine ceased fighting, amended its constitution to declare neutrality, and recognised Russia's annexation of Crimea and the independence of regions held by Russian-backed separatists.
A Ukrainian negotiator said that although small progress on agreeing logistics for the evacuation of civilians had been made, things remained largely unchanged.
"As of now, there are no results that significantly improve the situation," Mykhailo Podolyak said.