Prices at the pump are tracking a sharp rise in oil prices over the past month, after Islamist militants took control of several cities in Iraq. Investors and traders have worried that the spreading insurgency poses a threat to the country’s oil production.
A gallon of unleaded gasoline costed an average of $3.67 Wednesday, almost 20 cents above last year’s price, according to automobile club AAA. In California, drivers have been paying well over $4 a gallon for weeks.
On Wednesday, U.S. oil futures fell 86 cents, or 0.8%, to $104.48 a barrel after Libya’s government reached a deal with rebels to restart some exports. Crude-oil prices account for about 65% of the cost of retail gasoline.
A jump in gasoline prices is unusual for this time of year. Prices typically peak around Memorial Day, the start of the summer driving season. According to AAA, prices at the pump fell by an average of 21 cents a gallon in June in the past three years. But they rose this year due to the turmoil in Iraq.
Recent rulings by the U.S. government to allow some overseas exports of a kind of ultralight oil could lead to a broader loosening of the country’s ban on crude-oil exports, which has been in place since the 1970s. Some argue that exports would make U.S. oil more expensive, boosting fuel prices further. Others say overseas demand would encourage producers to drill more, which would keep prices down.