By Timothy Cama - 06/20/14 06:18 AM EDT
The violence in Iraq has already pushed crude oil and gasoline prices up here in the United States, and prices could rise further if fears of supply disruption come true.
Gas cost an average of $3.68 a gallon in the U.S. Thursday, the highest for a June 19 since the major price spikes of 2008, according to auto group AAA. Prices rose 3 cents a gallon after the Iraqi city of Mosul fell to rebels last week, spokesman Michael Green said.
“The oil market is concerned, of course, if the violence were to spread into onshore production areas, resulting in a supply disruption,” said Andy Lipow, a Houston-based oil consultant.
Lipow said the fighting between rebels and the government is largely concentrated to Baghdad and cities north and east of there. Overseas oil exports are shipped from Basra, a port in Iraq’s south, far from the current unrest.
“As of today, we have not seen any disruption export supply disruption through the port of Basra nor any production impact through these southeastern fields,” he said.
The U.S. only gets about 4 percent of its imported oil from Iraq and depends more heavily on Saudi Arabia and Kuwait.
But other areas of the world that rely on Iraqi oil, such as Europe and Asia, would likely turn to Saudi Arabia and Kuwait to make up any shortfalls, increasing prices in America.
Benchmark West Texas Intermediate crude traded for approximately $106 a gallon Wednesday, matching the highest prices since September.
The speculative nature of oil prices infuriated Sen. Bernie Sanders (I-Vt.).
“I am getting tired of big oil companies telling us that gasoline prices are going up because of the turmoil in Iraq,” Sanders said in a Thursday statement. “The truth is that big oil will never miss an opportunity to increase the price of gas. Today, it’s Iraq. Tomorrow, it may be the weather. On and on it goes.”
Sanders said he’d introduce legislation to give the Commodity Futures Trading Commission power to clamp down on excessive speculation in oil markets.
Lipow speculated that if Iraqi violence cuts supplies, crude oil could reach $125 a barrel, pushing gas prices to an all-time high of $4.20. That would undoubtedly lead to calls to release oil from the Strategic Petroleum Reserve (SPR), as well as similar reserves in other countries.
So far, the White House hasn’t publicly entertained the possibility. Asked about it Wednesday, then-press secretary Jay Carney said officials were closely monitoring the global oil market situation.
“And my understanding is that at this point we have not seen major disruptions in oil supplies in Iraq,” Carney said. He declined to speak about any SPR plans.
“This is obviously something that we monitor regularly, both localized in Iraq and any effect or impact on global supply,” he said.
AAA’s Green said his group opposes SPR releases that are intended purely to reduce prices. Instead, he said, it should only be used in cases of shortages, and there haven’t been any signs of that.
Patrick DeHaan, a petroleum analyst with GasBuddy.com, said “about the only way we’re going to see an additional impact” on the cost of gas is if the Iraqi supply took a major hit.
“The only way that the violence in Iraq would continue to have an impact on oil and gas prices is if something new were to transpire, something with the magnitude of oil exports being cut,” DeHaan said.