NEW YORK (MainStreet) Higher gas prices will prevail at the pump with the threat of military actions in Iraq rising since even the threat of a disruption in the supply of crude oil sends the market into a frenzy, industry experts said.
The political turmoil in Iraq affected international oil prices immediately, which rose by 5% when news first came out about the increased insurgent activity, said Rob Desai, an energy analyst at Edward Jones in St. Louis.
Wholesale gasoline prices rose also by 5% since the U.S. still imports a significant amount of oil, he said.
"I think heightened prices reflect the risks properly, although I would expect oil prices to increase even more if we begin to see an impact on Iraqi oil production," Desai said. "In the past, war and military action has had an impact on oil production, so I think this is a very possible scenario."
Prices at gas pumps across the country are currently averaging $3.67 a gallon, according to Gasbuddy.com. The lowest price is in South Carolina where gasoline prices are $3.38 a gallon and ranges from $3.49 a gallon in Texas to $3.88 in New York. The highest gas is in Hawaii at $4.34.
Iraq remains a significant player since it produced 3.1 million barrels per day in 2013 or 3.5% of global production. Iraq is OPEC's second largest crude producer, the world's third largest exporter of oil and has the fifth largest crude reserves in the world. Russia and Saudi Arabia are the world's largest producers, and they each produce 10 million barrels a day.
"This is a significant amount to remove from the market and would have global implications," Desai said. "OPEC has some spare capacity, so I wouldn't expect new highs or anything too significant, but some noticeable increase would make sense."