The national average for a gallon of regular unleaded gasoline stands at $3.66, 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. Prices in several Midwestern states have risen sharply on rising demand and the annual switch by refineries to costlier summer-blend fuels.
Gasoline at U.S. Pumps Set to Hit Six-Year Seasonal High. In Michigan, gas averages $3.96 a gallon, up 5% from $3.76 last month. Illinois motorists now pay an average $3.97 a gallon, up from $3.79 last month. In Wisconsin, gas now averages $3.74, up from $3.59. Minnesotans are paying an average $3.59 a gallon, vs. $3.50.
It’s amazing what a couple of weeks, and unrest in an oil producing part of the world, can do. At the beginning of the month, AAA predicted gasoline prices, while high, would remain fairly steady through the month, with a possible slight rise as we headed into the fourth of July weekend. In their words, “AAA predicts the national average price of gas this summer likely will vary from $3.55 – $3.70 per gallon.” They did add a caveat in the next sentence though, and one which seems to be quite accurate with the current geopolitical situation in Iraq. The sentence they added was, “Major refinery disruptions, geopolitical concerns or a damaging hurricane season could send prices higher than forecast.”
With violence threatening Iraq‘s civilian population and overwhelming the country’s security forces, a shadowy group known as the Islamic State in Iraq and Sham (ISIS) has managed to seize control of key cities including Mosul, the country’s second-largest, Ramadi, Falluja and Tikrit. Fears about global supply mounted, as reports surfaced that Russian tanks had moved into beleaguered Ukraine, sending crude on a tear and overwhelming the impact of lackluster U.S. economic data.
Iraq is the second-largest crude oil producer in the Organization of Petroleum Exporting Countries. Iraq produced 3.3 million barrels a day of crude last month, trailing only Saudi Arabia among members of the Organization of Petroleum Exporting Countries, data compiled by Bloomberg show. The Persian Gulf country is forecast to provide 60 percent of OPEC’s growth for the rest of this decade, the International Energy Agency said June 13.
Any reduction in the flow of Iraqi crude due to the ongoing Islamic insurgency in the northern Iraq cities of Mosul and Tikrit could have worldwide economic consequences, according to oil industry analyst Phill Flynn, who said speculators are watching for the worst-case scenario. “They think that Baghdad will not fall and that will be a more spirited defense of that city,” Flynn said. “But if it does fall and if the terrorists move further south, the price you’re paying at the pump today is gonna look like a bargain in a couple weeks.”
Across the country, prices have begun to creep up with the price of oil. After rising 4.1% last week, benchmark U.S. crude for July delivery rose $0.36 to $107.27 – the highest in nine months – in electronic trading on the New York Mercantile Exchange. Brent crude, a benchmark for international oils, gained $0.63 to $113.09 a barrel in London.
Once crude prices reach $110 per barrel, the Obama administration might opt to release some oil from U.S. strategic reserves to boost supply and stunt prices. But that crude still must be refined into gasoline, so any release could take weeks to translate into lower prices at the pump, Laskoski said.