Iraq Unrest Pushes Crude Prices Up Higher; Spike In Gas Prices Could Occur
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Crude oil prices were pushed to their highest levels so far this year on Friday based on the civil unrest occurring in Iraq. According to a report, the worldwide demand for oil is likely to increase but the oil supplies in the country are not at an “instantaneous” risk.
International Energy Agency, out of Paris, said the Iraq events are concerning but it doesn’t seem to have spread, putting the country’s oil supplies in immediate risk. The agency said the majority of the fighting has been in the northern regions – production of oil has stalled here since March. However, the biggest oil production comes from the southern regions of the country, with exports arriving from Basra terminals.
Iraq contains the fifth largest oil reserves in the world and is the second-largest producer for the Organization of Petroleum Exporting Countries, behind Saudi Arabia. It currently produces 3.3 million barrels a day.
The IEA said the production amount that Iraq has is large along with the political roadblocks it faces. The agency noted that Sunni insurgents have made tremendous gains in the northern part of the country since it began its military campaign earlier in June. Tikrit and Mosul fell to the Islamic militants who said they will capture Baghdad.
Due to the unrest, world oil prices – including the U.S. – have risen about four percent this week alone. The West Texas Intermediate, which is the U.S. benchmark for crude oil, was up 38 cents on Friday, closing at $106.91. Brent, which is the international benchmark, saw a 31 cent increase, closing at $113.41.
IEA said it expects the demand for oil to increase throughout the world, affecting the prices of both oil and gas. With high oil prices, a spike in gas prices could ensue, which are already happening. The average price of gasoline was $3.58 between Memorial Day and Labor Day in 2013. The price for the last month has averaged around $3.65.
And, according to Gasbuddy.com’s senior energy analyst Tom Kloza, with oil prices still rising, regular unleaded gasoline could see a five to 10 cent increase per gallon, which will keep the summer prices high.
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