Many consumers have come to expect lower gasoline prices in the month of September, and that’s generally a good assumption. Analysts had been predicting a drop to about $3.40 by early fall as the summer demand decreased. But now experts say we should expect a spike of up to 10 cents per gallon as crude oil prices and gas futures soar due to the anticipation that the United States may intervene in the Syrian conflict. If this happens, the Middle East oil supplies could be disrupted.
According to a report by USA today, “This week we have seen the prices for crude oil for October delivery jumped above $112 a barrel early Wednesday on the New York Mercantile Exchange – a two-year high. It settled at $109.87.”
Tom Kloza, chief oil analyst for gasbuddy.com, noted the impact of the gas price increase may be felt differently in different areas of the country. “In some portion of the country, those increases are translating into a few bumps higher, and in other areas, the slow drift to lower (pump prices) has been put in limbo.”
Oil production- how big of a player is Syria?
The good news is Syria is not a big oil producer. In fact, Syria currently generates less than 100,000 barrels of oil. Of course they have also seen their output decline significantly over the last two years due to their civil war. Two years ago they were producing 400,000 barrels per day. The bigger concern, according to experts, is instability in Egypt which could impact access to the Suez Canal.
Experts are also concerned about instability and civil unrest in Iraq. There were over 1,000 Iraqis killed in the month of July, the highest amount killed since 2008. Libya is also a concern. Libya’s production of crude oil has dropped to 300,000 barrels a day down from an estimated 1.6 million barrels produced prior to 2011 when dictator Moammar Gadhafi ruled. Now Libya is facing more significant declines in oil production due to worker strikes. Combine all of these factors and there is now a real concern that crude oil prices could reach their all-time high of $145.29 a barrel. The last time we saw prices that high was in July of 2008.
What if the conflict spills over to other areas?
Industry observers also note that the conflict could “spill over” to other major producers. If this happens we can expect even larger interruptions in oil production. But some experts counter, claiming that even if there is a significant rise in the price, as demand is reduced, the prices would naturally decline. Saudi Arabia also has the capability to increase their oil production to eliminate significant supply disruptions.
What do most of us think? Many people in the United States would like to continue to see the United States eliminate their dependence on foreign oil.
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