Iraq conflict pushes up LI gas prices, which could go much higher
Long Islanders can expect big increases in gasoline prices this summer if the turmoil in Iraq significantly reduces its crude oil output, which could disrupt global supplies.
Fears about a disruption have already begun pushing up the price of oil -- and, on Long Island, the price of gasoline.
If Iraq's oil production is significantly disrupted, some analysts think prices at the pump could match or even exceed the record $4.346-a-gallon peak for regular in July of 2008, when crude oil surged briefly above $140 a barrel.
"Chances are very likely you will spend more than that between now and Labor Day," said Tom Finlon, director of Energy Analytics Group Ltd., a trading adviser to an energy hedge fund in Jupiter, Florida.
Andy Lipow, head of Houston consulting company Lipow Oil Associates LLC, says big gas price increases, if not record breakers, are quite possible.
"If we saw a significant disruption of Iraqi oil exports, the oil market could spike up to $125 a barrel, which would place the national average retail price for gasoline above $4 a gallon," he said. That would be 33 cents a gallon above Wednesday's national average for regular. U.S. crude oil cost just under $106 a barrel Wednesday.
Even if crude prices rise no further, more increases at the pumps are likely, given the jump in oil prices in the past week, Lipow said. "The consumer should expect prices at the pumps to rise 5 to 10 cents a gallon over the next couple of weeks," he said.
Two weeks before the Fourth of July weekend, regular gasoline averaged $3.975 in Nassau and Suffolk Wednesday, according to the AAA. That's up 1.3 cents from a day earlier and 3.9 cents from a week earlier. Regular gas costs 17.5 cents more than a year ago. The average price has risen by 37.5 cents from the recent low of $3.60 on Feb. 3 on rising crude oil prices and a switch over to more expensive summer gasoline.
Iraq isn't the only factor pushing prices up. With the coming of milder spring weather, driving increased, raising demand for gasoline.
As OPEC's second-largest producer, Iraq exports about 2.7 million barrels a day of crude oil, including some to the United States and more to Asia and Europe -- about 4 percent of the world's daily production.
So far, the fighting in northern Iraq does not appear to have significantly affected the nation's crude oil output, analysts said; much of the production is in the south of the country. But they said fighting and a resulting fire Wednesday around that nation's largest refinery -- which produces finished fuels for domestic consumption, not crude oil for export -- suggests that Iraq might have to seek refined products on the international market.
Tom Kloza, chief oil analyst for the Oil Price Information Service of Wall, New Jersey, thinks price increases will be restrained, in part because Saudi Arabia, OPEC's largest supplier, has the capacity to make up for any loss of Iraqi production.
Much of the gasoline used on the East Coast is imported from Europe, where refineries use a more expensive Brentgrade of oil. Its price has reacted more to the fighting in Iraq, rising $5 in the past week to $114.26 a barrel.