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Iraq Violence Sends Gas Prices Slightly Higher

Iraq Violence Sends Gas Prices Slightly Higher

(WASHINGTON, June 16, 2014) The national average price for regular unleaded gasoline is $3.66 per gallon.  Today’s average is fractions of a penny more than a week ago, a little over a cent more than a month ago, and a nickel per gallon more than the same date last year.  After falling for nine straight days, the national average has increased for five consecutive days for a total of about two cents per gallon as violence in Iraq has intensified.

AAA has predicted that drivers will pay relatively high prices this summer, ranging from $3.55 – $3.70 cent per gallon, however this range may be higher if unrest in Iraq escalates or disrupts oil production in the region. Given the increase in crude oil prices to nearly a nine-month high, retail gas prices are likely to rise to or near the current 2014 high ($3.70 on April 28) in the coming days.

Gas prices often decline in June with the national average falling the previous three years at an average of about 20 cents per gallon. The recent turmoil in Iraq is likely to prevent that trend from repeating this year. A year ago the national average was turning lower as domestic production and distribution issues eased, although market watchers were keeping a close eye on geopolitical tensions in Syria. While Syria is not a major oil producing nation, there was concern that fighting might spread to other countries in the region, which kept some upward pressure on crude oil prices.

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Drivers in Hawaii ($4.35), California ($4.09) and Alaska ($4.06) continue to pay more than $4 per gallon for regular unleaded gasoline, a trend that has lasted for 23 days. Prices have remained relatively stable (+/- 2 cents) in 34 states and the District of Columbia over the past week, however consumers in five states have seen prices climb a nickel or more: Montana and Ohio (+6 cents) and Illinois, Arkansas, and Missouri (+5 cents).

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The overall picture for the states is reflecting a bit of regional variation, especially when looking at the month-over-month and year-over-year averages. The biggest fluctuations in price are evident when comparing year-over-year averages, where prices in 29 states and the District of Columbia have swung by 10 cents or more. The biggest price drops have been in the Midcontinent and Mountain States: North Dakota (-26 cents), Colorado (-22 cents) South Dakota (-19 cents) and Utah (-18 cents).  The biggest price increase is Pennsylvania (+23 cents).

The month-over-month picture reflects a similar picture of price volatility. Consumers in Michigan (+20 cents), Illinois (+16 cents), Montana (+14 cents) and Wisconsin (+14 cents) are paying the largest premiums per gallon.  Meanwhile, drivers in parts of the South have watched pump prices fall: Alabama (-11 cents), Georgia (-8 cents), South Carolina (-7 cents) and Florida (-7 cents).

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Much of the attention of global market watchers has shifted from Ukraine and Russia, to widespread violence in Iraq.  According to the EIA, Iraq has the fifth largest proven oil reserve in the world and is the second largest producer of crude oil in the Organization of the Petroleum Exporting Countries. Markets will continue to monitor the conflict closely due to the potential for violence to spread to neighboring oil producing nations, and the overarching regional foreign policy implications associated with an Iraqi civil war.

After a run-up late last week, and with no major market-moving news over the weekend, crude oil prices were relatively steady today. At the close of formal trading on the NYMEX, West Texas Intermediate (WTI) crude oil settled at $106.90, just a penny shy of Friday’s settlement, which was the highest since September 18.

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