As the situation in Iraq continues to escalate as Islamic militants continue to advance across the nation, gas prices in the U.S. are set to rise.
The national average for a gallon of regular unleaded gasoline stands at $3.65, with the prospect of a five-to-10 cent jump over the next two weeks, according to Patrick DeHaan, senior petroleum analyst at GasBuddy.com.
The turmoil in Iraq spooked Wall Street last week and left the major market averages in the red. The markets have taken a bit of a breather this week, as investors shift their focus to oil and gas prices.
“There was a bit of irrationality in the markets last week, but the story is still evolving,” DeHaan says. “A lot of places have already seen [gas] prices go up—for motorists who are paying attention to the pump, there is a ceiling as to how much prices can go up.”
When the news first broke about the al-Qaeda offshoot’s movement in Iraq last week, DeHaan says wholesale gas prices spiked as high as $3.99 per gallon uniformly in places like Michigan, Indiana and Ohio.
“If there is a real disruption in Iraq, I see more potential for price hikes than we do now,” he says. “After [last week], oil hasn’t reacted that much, its only up a whopping seven cents per barrel.”
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President Obama announced on Monday that the U.S. will send 275 military personnel to provide support and help secure U.S. assets. The oil market failed to react on the news, because the U.S. has been out putting its highest levels of oil in years, DeHaan explains.
“If this were 2005, we would have seen a 20-to-30 cent jump in gas prices. But it’s lower today because our domestic production is so much higher.”
If oil exports are stalled in Iraq, which accounts for about 4% of the world’s oil exports, DeHaan says drivers can expect a hefty price jump at the pump.
“It is a significant risk, and I am not sure what kind of security there is on the ground,” he says. “If no one is guarding the port, that is a concern. It depends on how well they are protecting that infrastructure. If the pipelines are vulnerable, any attack would disrupt the pipeline, and it would depend on the severity of the attack.”
If it weren’t for this escalating situation in the Middle East, DeHaan says Americans would have enjoyed a summer of reasonably-lower gas prices.
“June is usually when gas prices go down,” he says. “Unfortunately, you never know when the Middle East will evolve into a full-blown situation. There’s forecasting, and then there is trying to forecast world events into your forecast. The crystal ball is never able to predict this stuff.”