Tags: Iran | Tensions | Gasoline | Prices

Iran Tensions Adding 30 Cents to Gasoline Prices, Experts Say

Friday, 24 February 2012 08:09 AM

Tensions with Iran are adding 30 cents to a gallon of gasoline, and already high prices could soar even higher, experts say.

Iran has threatened to close the Strait of Hormuz, a narrow waterway linking oil-rich Persian Gulf nations with the rest of the world, to protest sanctions slapped on the country for its nuclear program.

Fears that tensions could escalate into war could send prices soaring, as global supply is not that strained when removing the Iranian factor.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

"The market right now is fairly well supplied," says John Kingston, director of oil at the analytics firm Platts, according to CNNMoney.

"You've just got a significant fear factor that things could get worse."

Gasoline demand in the U.S. is down thanks to the recession, fuel-efficient cars and consumers balking at high prices, while crude tends to sneak its way onto global markets even when countries cut supply — cheating production quotas has long been an issue for OPEC.

Stockpiles have been rising, but fears that Israel may attack Iran, however, have prices soaring.

The U.S. is trying to convince Israel to hold off an attack, but should such a scenario play out, $4 gas will look like a cheap memory as $5 would become more likely.

"If Israel does hit Iran, all bets are off," says Mike Fitzpatrick, editor-in-chief of Kilduff Report's Energy Overview, CNNMoney reports. "$150 [oil] is the first marker we'll hit."

One beneficiary has emerged amid rising gasoline prices — United States Gasoline Fund, an exchange-trade fund offering exposure to gasoline.

It's up almost 23 percent in the last three months, and is popular in that the fund's net asset value isn't tied to spot prices but rather the change in near-month futures contract prices.

"The simplest reason to own UGA is that you believe unleaded gasoline prices are going up," says Abraham Bailin, ETF analyst at Morningstar, CNBC reports.

The national average price for a gallon of regular gas is hovering around $3.61, up 23 cents from a month ago, CNBC adds, citing AAA data.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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