Peter Doig tells Tim Adams about LSD, fame and the prices of his art

Fifteen years ago, while Damien Hirst and the other YBAs were storming the citadels of the art world, another British artist was working away largely unnoticed. But all that changed last year when one of his paintings sold for £5.7 million - a record for a living artist. Here Peter Doig tells Tim Adams about LSD, fame and why the prices of his art make him feel physically sick

As a painter, Peter Doig is a master of the unsettling. Even so, this must have been an odd experience: nearly a year ago, a picture he had made in 1990 of a white canoe mirrored on a lake at night, one of an obsessive series, sold at Sotheby's for £5.7m. It was the most ever paid for a painting by a living European artist. Doig didn't get the money - the painting had been owned by Charles Saatchi - but in that extravagant moment, he went from being a quiet critical success to an infamous commercial one. He was, suddenly, new evidence of the art world gone mad. How did that feel?

It made me feel sick, really,' he says, after a longish pause. We are sitting eating croissants in a room at Tate Britain on London's Millbank, where Doig has a retrospective opening in February. 'I'm talking about nauseous sick, not so much disgusted or anything. That someone should have put their hand in their pocket and spent that much money on a painting of mine seemed so unconnected to anything that I ever did.'

Doig is a youthful 48, quick to smile. He thinks some more, has another go at it. 'As an artist, you are aware there is this strange money market out there, but you have no sense of how it works. The last time I had an exhibition, people wanted to buy the paintings, sure, but not for money like that. So you ask yourself: what happened to create that escalation? I thought when a painting of mine went for £300,000 that was a huge amount of money - I mean, when I was a trustee of the Tate 10 years ago, I remember discussing how much a Sickert was worth and at the time it was thought about £300,000, so you wonder who is the architect of that change? Certainly not the painter... not me.'

The day after the sale, like every day, Doig had to go back into his studio in Port of Spain, Trinidad, where he has lived for the past five years. The studio is hot, dusty, industrial, in one corner of an abandoned rum factory. His oldest painter friend, and current neighbour, Chris Ofili describes the place as like 'an artist's Oxfam, full of paintings hanging around, almost discarded, as if there are lots of false starts'. Did the new price tag change the way Doig looked at those works in progress?

'It did for a long while, certainly,' he says. 'It made me wonder: what am I doing this for?' The way he works didn't help. He cheerfully describes his finished work as the product of 'mistake, after mistake, after mistake', a painstaking process of failing better, and talks of wanting the layered surfaces of his work to be 'slightly repellent, on close inspection'.

'If you are someone like Jeff Koons,' he says of the American king of kitsch, 'and you have to work out how to make a big chrome heart or something, then there are lots of people and a big production involved. The money is more natural somehow. For me, I am just on my own in the studio, trying to make things work. One thing is sure: it doesn't make painting any easier.'

Fifty of Doig's paintings, going back 20 years, are packed and waiting to be hung at the Tate. His autobiography is stacked in those crates. In some ways, this retrospective represents a homecoming - Doig painted White Canoe, for example, at the Chelsea Art School next door to the Tate - but he's had lots of homes. The son of a restless father, an accountant for a shipping company, he was born in Edinburgh, moved to Trinidad at two, Canada at seven and never lived in the same house for more than a couple of years.

His paintings always gesture toward this journey - colour-saturated tropics, whited-out snowscapes - and though he is more fascinated, he says, by the idea of memory than by specific events of his past, they often invite you to think: how did he get here? He explains a little hesitantly, as if giving away secrets.

His father was an occasional painter, dabbling in abstracts. Doig first started drawing for himself, though, after he had left home at 17 to go to work as a roughneck with a crew drilling for gas on the Canadian prairies. 'That was an extreme time as far as my relationship with landscape went,' he says. 'The prairies are flat and go on for thousands of miles. You feel extremely vulnerable. I worked with the crew during the day, but I had no vehicle. We would often be 50 miles from the nearest motel, so I'd walk up to a local farmhouse and ask if I could sleep in the barn.'

It was his first experience of a sense that his paintings often give: 'of being attached to the earth, but only just, like in a dream'. Working on the rigs also made Doig realise he did not want to be a roughneck for the rest of his life, not least because the majority of his fellow labourers on the drilling platform had lost most of their fingers. So at night, he started drawing, still lifes and landscapes, and had an idea he would go to art school in London, the place where the music he listened to, punk, started out.

He enrolled at Wimbledon, and later went to St Martin's and Chelsea art schools, all the time picking up friends. He met Ofili at Chelsea and later shared a studio with Dinos Chapman. At one remove, he watched the emergence of Brit Art and the phenomenon of Damien Hirst and YBAs.

It was, he suggests, a curious time to be a young painter; the energy was elsewhere, with the conceptual artists who were coming out of Goldsmith's and being snapped up by Saatchi. He made a painting while at Chelsea, called Art School, which depicts three chipmunks peering out of a tree trunk. 'I was a mature student,' he says, amused, '30, I'd been painting for 10 years and I was suddenly surrounded by all these 21-year-olds, incredibly eager, and starting to be exhibited. The chipmunks were supposed to represent all these keen students, though at that moment you couldn't imagine how popular they would become or how prominent their art became.'

Charles Saatchi came to some of Doig's early shows, in pubs and odd spaces, but he never bought anything. The press was full of articles about the death of painting, but Doig, who by now had a wife whom he'd met at St Martin's and the first of their five kids, trusted those obituaries were exaggerated.

Perhaps one consequence of his rootless childhood was a hoarder's habit: he was a great collector of images and scraps of things, taking Polaroids, hanging on to bits of strangeness he saw. In London, he often went to Canada House on Trafalgar Square to raid its library of travel brochures, trying to make some sense of his memories of adolescence in Toronto. In contrast to the slickness of the art that was making headlines, he had a desire to make paintings that were resolutely 'homely', often literally so: a recurring obsession in his work were colloquial suburban and rural houses, glimpsed from across roads or through trees, domestic images so singular that they shift, like David Lynch scenes, into the territory of uncanny.

Doig's first break, and the first money he made, came in 1993 when his painting Blotter won the John Moores Prize. The painting, though apparently naive, carries the intensity that Doig is able to invest in his surfaces. He describes the way people look at paintings as 'different from how they look at anything else; it's a strange, lost scrutiny ...' Blotter demands this gaze. It depicts a single adolescent figure standing alone on a frozen lake dwarfed by the woods and ice around him; it invites many questions, not least the relation of the figure to his teenage self.

'I understand it completely as something autobiographical,' he says, 'though I don't know it's easy to explain.' The painting partly grew out of a photograph he had taken of his brother, after they had deliberately flooded a frozen pond to see the effect the water had on reflection. 'The figure is not doing much, standing there, contemplating, moving his foot. But then there is this other stuff around. The painting is about noticing that stuff really - all my painting is concerned with something like that.'

The blotter of the painting's title is a reference to the LSD that Doig used occasionally as a teenager 'without being a total acid head like some of my friends'. Looking back, he suggests 'it was an important, sometimes terrifying drug to experiment with, though only people who have taken LSD would really understand how it might have affected my work. Blotter tries to catch the idea of all this activity in the head, but the body being still. It is something like being absorbed into the landscape, I suppose.'

Doig stopped taking psychedelic drugs when he was 18, but the experience remains a reference point. His paintings often feel very much like distant products of the Seventies, dwelling on damaged utopias, though he is anxious to loosen their moorings: 'Painting becomes interesting,' he says, 'when it becomes timeless.'

As a result, his best work occupies some uneasy space between anecdote and abstract; it never lets you forget either its reference in the real world, nor its painterly surface. Alongside his canoe pictures, the best expression of this is perhaps his 'Concrete Cabin' series, made in 1994, which also casts light on some of his recurring preoccupations.These paintings were all based on a near-derelict Corbusier building at Briey-en-Forêt in north- eastern France, which Doig stumbled upon while walking in adjacent woods. 'The building took me by surprise as a piece of architecture,' he says, 'but it was not until I saw the photographs I had taken of the building through the trees that it became interesting. That made me go back and look at it again. I was surprised by the way the building transformed itself from a piece of architecture into a feeling. It was all emotion suddenly.'

Some of this emotion he brought with him, some of it seemed centred in the place itself. 'The building is in a strange, sad part of France, very close to Verdun,' he says, 'and just approaching the town you are immediately aware of what went on in the First World War and the Second World War. In the town, there is a graveyard with lots of black crosses on the graves of German soldiers. The woods have a sombre feeling that there is no getting away from. The paintings could not help but contain that.'

Such a romantic idea of painting was violently at odds with the sensation and irony of many of Doig's contemporaries, but eventually the market, and Saatchi, started to come round to his way of thinking (a shift which culminated a couple of years ago in Saatchi's show The Triumph of Painting, in which Doig starred alongside Martin Kippenberger and others). It is tempting to think he moved to Trinidad to escape the venality of the London art world, but it was less complicated than that. 'It was more to do with being excited by somewhere else,' he says. 'And giving my family some of the childhood I'd had. I went back to Trinidad in 2000 with Ofili; we were doing a residence together. He and I went back maybe seven times in the next three years - at any opportunity. One time, we were in a group show in Los Angeles and we managed to blag a ticket to go via Trinidad for two days - a crazy journey. It just got to us. I bought a piece of land when I went there in 2000, which wasn't something I would have imagined that I would do. It seemed like a good alternative to London, because, although I had left there when I was seven, it was so familiar to me. I could still remember my way around.'

He and Ofili are now embedded in Port of Spain culture; Doig runs a weekly film club in his studio that attracts a 'proper Trinidad mix' of people to watch the likes of Black Narcissus and The Big Lebowski. The flyers for the films are probably worth holding on to - Doig paints them himself.

Since he has been in the Caribbean, he has stopped painting so much from photograph and memory and started responding to what is around him, Gauguin-like. He takes boat trips, sometimes with Ofili, to the wild northern coast: 'Incredible landscapes and caves and archaic spaces like natural cathedrals, chasms, strange pelicans, islands covered in their shit.'

Does being there make him want to collapse the idea of what a Peter Doig painting is?

'You always want the paintings to have some freedom; the good ones always had that; they were escaping from what you had done before.'

Those escape routes are often tortuous; Doig works slowly, finishing maybe six or eight paintings in a year. The process of finding endings still troubles him. 'Basically, I am always trying to resolve something. It is sometimes a technical thing, usually involving drawing, which I'm not very good at, and it is always one of those things you can only get to by making it. Just scrape it off and start again. It is often a fluke until you eventually get there.'

He talks of his work with great modesty and with a sense of vocation. He's not sure he wants the extra pressure of fame. 'This might sound strange, but I never thought of them as being particularly good paintings. I wasn't trying to make an anti-painting or anything, but I certainly enjoyed the idea that there was a lot of bad painting involved in them. That trips you up, too, though. What is bad painting? Picabia made some deliberately bad paintings, but they were by him, so great in a way.'

In that sense does he fear, now he is the most expensive painter in Europe, that he can do no wrong?

'Oh,' he says, laughing, 'I'm pretty sure I can still do lots of wrong.'