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Turmoil in Iraq is pushing up U.S. gasoline prices

By Jonathan Fahey

AP Energy Writer

LAST UPDATED: 08:30 a.m. HST, Jun 19, 2014

Violence in Iraq is pushing U.S. gasoline prices higher, depriving drivers of the usual price break between Memorial Day and July Fourth.

The national average price of $3.68 per gallon is the highest price for this time of year since 2008, the year gasoline hit its all-time high. 

The good news is that gasoline is not likely to spike above $4 as it did 6 years ago. Or even cross $3.90, as in 2011 and 2012.

"You are going to pay a little more than we thought you were going to pay," says Tom Kloza, chief oil analyst at the Oil Price Information Service and GasBuddy.com. "But you are not going to see any apocalyptic numbers."

In Hawaii the state average gas price is $4.35 per gallon, about the same as last week, two cents less than last month, and a penny less than a year ago, according to the AAA Hawaii Weekend Gas Watch.

"The situation in Iraq certainly has the potential to drive local gas prices higher, but it's unclear whether that will happen," said AAA Hawaii General Manager Liane Sumida. 

Gasoline prices typically fall in the weeks following Memorial Day, after supplies increase enough to fill up the cars of the nation's vacationers as summer approaches. Prices have declined during the previous three Junes, by an average of 21 cents per gallon, according to AAA.

This year, drivers are paying more. The average has risen every day for a week, and is now higher than it was on Memorial Day -- with more increases sure to come.

Even before violence in Iraq broke out, this year's predicted decline was slower than expected because of rising U.S. fuel demand and extensive maintenance at some Gulf Coast refineries that reduced gasoline output.

Then, last week, Iraqi insurgents seized a pair of cities and pledged to attack Baghdad. None of Iraq's oil fields were targeted, most are far away from the fighting, and oil exports have continued to flow. But Iraq is OPEC's second-largest exporter, so worries that oil production might be impacted was enough to send global oil prices up by nearly $6, to $114 per barrel.

The average price of gas rose 3 cents per gallon during the past week, and analysts expect more increases over the next couple of weeks.

How the situation in Iraq plays out is impossible to predict, but analysts note that the global market is well-supplied with oil and fuels. Morgan Stanley wrote in a recent report that the potential for a significantly higher sustained oil price was "limited without a major disruption," and that "the conflict will likely be contained primarily North of Baghdad, limiting the impact on oil exports."

But drivers in 15 states are already paying more for gas than they have since March of 2013, according to Kloza. The national average will likely soon surpass this year's high of $3.70 per gallon, set on April 28.

Kloza thinks the national average may get close to last year's high of $3.79 per gallon, but he does not expect to see it reach the highs of 2011 and 2012, when it rose above $3.90 per gallon.

And the chances of the average crossing the $4 mark?

"The (last place) Mets have a better chance of winning the World Series," he said.

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harley1 wrote:
don't even know why you bother to post these inane internet articles since it has absolutely no effect on fuel pricing here. It remains high and is impervious to outside influences other than staying at insanely high levels, no thanks to government and the refineries!
on June 19,2014 | 05:29AM
serious wrote:
If you Google the Jones Act you will find that the price of Gulf of Mexico oil is enormously inflated due to the Act. Now, if we had the Keystone pipeline which Obama will not approve until the elections since it benefits Red states, we would have cheaper gas!!
on June 19,2014 | 08:53AM
HD36 wrote:
The AP is a government propaganda machine. The price of oil, and thus gasoline will go up regardless of the Iraq situation because the monetary expansion policies of the Federal Reserve is causing massive inflation. All commodities will rise because there's a finite supply.
on June 19,2014 | 06:28AM
bsdetection wrote:
Massive inflation? Where? Did you mean Venezuela? Here are recent U.S. rates: 2009: -0.4%; 2010: 1.6%; 2011: 3.2%; 2012: 2.1%; 2013: 1.5%
on June 19,2014 | 07:56AM
awahana wrote:
If you haven't gone EV by now, in this godforsaken 'paradise' called Hawaii (a paradise for greedy corporations and politicians), it's your own fault.
Even David Ige knows that we need to do a lot more than we do now. He's mild mannered, but there is a reason why so many are supporting him (HSTA, Cayetano, Ariyoshi, Thielen, etc.) without a single ad on TV or Radio.
When they say 'David vs Goliath,' this is really the case. David vs Neil is really what's happening. Neil is backed by the wealthy and the powerful. This is why Kakaako and Monsanto are winning the past four years.
Why did Dante Carpenter and the Democratic convention try to leave out David Ige? Do you see how corrupt the party is? History is in the making people.
on June 19,2014 | 10:06AM
awahana wrote:
...Dante Carpenter and the Democratic convention...
on June 19,2014 | 10:15AM
cojef wrote:
Get rid of the regulatory EPA agency and re-start mining coal and okay the Keystone pipeline and we will not have to worry about the skittish world oil market prices. Let Europe, China and Japan worry about oil supplies. We can and are energy independent once we get rid of the bureaucratic EPA.
on June 19,2014 | 12:04PM
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