Tags: Gasoline | price | Mideast | Tension

NY Times: Gasoline Could Quickly Spike to $5 if Mideast Tension Escalates

Thursday, 01 Mar 2012 08:34 AM

Gasoline prices are averaging over $3.73 a gallon nationwide and around $4.32 in California, and it wouldn't take much to send them to shooting closer to $5 a gallon if tensions escalate in the Middle East, experts say.

Prices at the pump could jump up 50 cents if conflicts break out, be it on a widespread or even isolated basis.

"If we get some kind of explosion — like an Israeli attack or some local Iranian revolutionary guard decides to take matters in his own hands and attacks a tanker — than we’d see oil prices push up 20 to 25 percent higher and another 50 cents a gallon at the pump," says Michael C. Lynch, president of Strategic Energy and Economic Research, the New York Times reports.

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A 50-cent increase translates to an extra $30 a month for the driver who pumps 60 gallons a month of regular unleaded gasoline.

Iran has threatened to close off the Strait of Hormuz, a vital chokepoint connecting oil-rich Persian Gulf countries with the rest of the world, and has even halted oil shipments to France and the U.K. to protest sanctions.

Fears have arisen that Israel is mulling a preemptive military strike against Iran with or without the blessings of its allies.

While experts point out the likelihood of saber-rattling turning into war are limited, threats alone are causing pain at the pump via speculative trading in oil markets.

In Washington, Democrats are blaming speculators for the increase.

"Right now, oil speculators are cynically exploiting fears relating to U.S. and European efforts to prevent Iran from getting nuclear weapons," says Edward Markey, a Massachusetts Democrat, Reuters reports.

Secretary of State Hillary Clinton has suggested prices are too high despite ongoing Middle East tensions, as supplies in the U.S. are not that tight.

"I am skeptical about the reasons for the increase in gas prices. I think that deserves careful attention by the Congress. Because there is supply," Clinton told the House appropriations subcommittee in charge of foreign aid, Reuters adds.

"I think the increase in prices is hard to explain based on the facts as we are aware of them."

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