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Energy

Oil Rise Could Push Gas to $4

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By Douglas A. McIntyre Published
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The price of crude futures reached $107 on concerns about the unrest in Iraq. That is the highest it has been since September, and several analysts expect the price to surge higher if the problem seriously disrupts the supply of oil from the country. Gasoline prices have hovered at about $3.65. However, that could change in a matter of weeks.

Crude prices (WTI for July delivery) were only $95 three months ago, so the price is up 12% in 90 days. While gas prices do not move exactly as oil does, because of refinery and transportation costs, the marriage is close. Under current circumstances, it would not take much more of a spike to press the average cost of a gallon of regular in the United States to $4.

Iraq’s issues are not alone as a possible reason for oil price increases. Tension between Russia and Ukraine moved prices higher a month ago. Since the trouble between the two countries has not ended, the effects of the friction could roil oil markets again. In tandem, greater problems in Ukraine and Iraq could easily move oil up another $10 a barrel. There is certainly precedent for political problems in oil-rich nations to cause unexpected increases.

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Gas prices have already reached close to $4 throughout much of the United States. In California, the price of the average gallon of regular is already above that at $4.08. California is home to 38.3 million of America’s 316 million people. The price of gas has reached $4.02 in Illinois, which is the fifth most populous state, with 12.9 million residents. Oil prices are also above $3.80 in Ohio (11.6 million population), New York (19.7 million) and Michigan (9.9 million). So, in those states, it is not hard to imagine that gas prices could be well above $4 in a matter of weeks.

ALSO READ: Airlines Hurt by High Oil Prices

Experts have often debated the impact of high gas prices on gross domestic product (GDP). Very few believe it is positive. Among households with members who are heavy drivers, and households with low or very modest incomes, there is often not much left after the costs of housing, clothing and taxes. Members of these households can quickly leave the consumer markets. What is already a fragile recovery of U.S. GDP becomes even more brittle.

If the situation in Iraq is not resolved, and particularly if it worsens, gas prices will be at $4 soon.

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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