A fireball has already ripped through two homes and parents are refusing to send children to the village school because they fear it is unsafe. The education authority has temporarily closed the school. Government officials are investigating how the explosion occurred and are trying to stop the petrol from seeping into streams and rivers.
It is estimated that 61,000 litres of petrol have leaked from an underground storage tank at the village petrol station in Bontddu, near Dolgellau.
Villagers say they are living in fear of further explosions. Four families have been moved out of their homes, rehoused by the local authority and told not to return until further notice.
One of those moved out of his house was David Collett, 43, who works as chef and manager at the Halfway House, the village pub. He said: "There was this small rumbling noise which grew louder and louder and the gable end of the house appeared to be moving. Then the cupboard door under the stairs flew open and a fireball flew out which ignited all the gases that were in the air in the house."
The fire was extinguished but the families do not know if there is any structural damage to their homes. They are taking legal advice about seeking compensation.
The Health and Safety Executive has been called in to co-ordinate the investigation into the explosion, which took place earlier this month. It said it would be weeks before the families can go home.
Brian Neale, of the HSE office in Wrexham, said the blast took place as the Government's Environment Agency was conducting a drilling operation to try and establish the full extent of the petrol leakage. The drilling led to complaints from villagers about the smell of petrol fumes pervading their houses which have been built on to the hillside with little foundation.
The petrol spillage is believed to have first occurred in September, from an underground tank at the filling station, which is uphill from the school and cottages.
The garage owner quickly reported the problem. Gwynedd County Council's environmental health team was called to investigate. It is thought that pockets of petrol vapour had gathered between rocks and shale on the hill slopes.
Elfyn Llwyd, the local Plaid Cymru MP, has called on the government agencies to act quickly to help the villagers return to a normal life.