As unrest and unrelenting bloodshed mars the Middle East, American drivers are feeling some sticker shock at the gas pumps with prices continuing to rise over the past few weeks. As of Thursday, the AAA Daily Fuel Gauge Report posted a national average of $3.68 per gallon of regular unleaded fuel across the nation, a couple of cents off of 2014’s previous highest price and 14 cents higher than a year ago. The AAA reported that gasoline is at its highest price for early summer on an average, since 2008.
Earlier reports from the AAA had predicted that gas prices were likely to fall 10 to 15 cents per gallon in June, a typical pattern for the beginning of summer every year. However, the most recent weekly assessment said that the ongoing violence in Iraq was likely to keep the price of oil at approximately $107 per gallon, which in turn meant higher production costs for gasoline.
If this trend were to continue, experts fear that gas prices were likely to hit the 2014 peak when a gallon of fuel was selling for $3.70 on April 28. Besides gasoline, drivers using diesel are also feeling the pinch at the pump. Diesel prices went up by one cent in the last week to $3.90. This price per gallon of diesel is six cents higher than last year.
The sticker shock of gas prices rising continuously is hitting motorists differently, with drivers in some states paying substantially more than others. For instance, Ohio drivers are shelling out $3.68 this week, which is 25 cents higher than on June 26, 2013. Similarly, drivers in Pennsylvania, Kentucky and Michigan are paying 28 cents and 31 cents more per gallon, respectively.
While Hawaii continues to lead the country in gas prices at $4.34 per gallon, Alaska saw the biggest jump in the past week with an 11 cents rise to $4.20. These states are followed by California and Washington State, which are members of the $4 plus per gallon club.
South Carolina is posting the lowest price for gas this week at $3.41 with Alabama, Mississippi and Tennessee following close behind. Yet, these states are paying at least 15 cents more per gallon as compared to last year.
These hikes in gas prices are a direct result of the successful gains on the battlefields of northern Iraq by the Sunni-backed fighters of the Islamic State in Iraq and Syria (ISIS), a violent terrorist faction that has broken away from al Qaeda. The very real threat of increasing insurgency in Iraq, which is the third-largest exporter of oil in the world and has the fifth-largest reserve of crude oil, is spurring fears of short-term disruptions in global oil supply chains. This is pushing the cost of crude oil to astronomic highs of $107 per barrel. Brent crude futures, an international benchmark, clocked a rise of 54 cents to $112.96, according to the Energy Information Administration.
However experts like Patrick DeHann, a senior petroleum analyst said that while the Iraqi geo-political situation remained unstable, a major disruption of global oil supplies is largely unlikely as long as the situation in the Middle East did not escalate. Experts minimized the chances of the world experiencing any oil shocks, similar to that experienced after the 1973 OPEC oil embargo came into play, post the Arab-Israeli war.
According to Nicholas Colas, who is a chief market strategist at brokerage firm ConvergEx Group, gas prices tend to rise during the summer months because of demand under normal situations. In other words, while drivers are likely to face some sticker shock due to rising gas prices at they continue to climb, he did not expect pumps to post $4 a gallon for gas, irrespective of Iraq’s internal status.
By Monalisa Gangopadhyay