What Iraq Conflict Might Mean for Gasoline Prices and Alternative Fuels

by Jon LeSage

Mil­i­tary con­flict has returned to Iraq dur­ing a peri­od of time the Unit­ed States has been wrap­ping up its mil­i­tary pres­ence. Oil traders are wor­ried that the action could spread, threat­en­ing sup­plies and prices. Iraq is the sec­ond largest oil pro­duc­er in the 12 OPEC-mem­ber coun­tries, and has been pro­duc­ing the largest source of growth among OPEC coun­tries.

While a sharp price hike is thought to be unlike­ly, the Iraqi bat­tle zone and tur­moil in oth­er major oil pro­duc­ers may keep prices increas­ing grad­u­al­ly. Chaos in Libya and Syr­ia has dimin­ished these coun­tries’ oil pro­duc­tion. Iran has faced inter­na­tion­al sanc­tions; two oth­er key exporters, Nige­ria and Venezuela, have been fac­ing their own dif­fi­cul­ties. Oil prices have risen to their high­est lev­el this year, and ana­lysts expect gaso­line prices to rise by as much as 10 cents per gal­lon due to the mil­i­tary con­flict in Iraq.

Crude oil prices hit their peak in July 2008 with $144.96 for West Texas Inter­me­di­ate (WTI), the US stan­dard, and $139.62 for Brent, the inter­na­tion­al bench­mark. One year after their peak, oil prices dra­mat­i­cal­ly dropped; while they’re not expect­ed to be head­ing up the 2008 peak any­time soon, the cri­sis in Iraq and oth­er coun­tries should bring WTI and Brent prices beyond the low-$100 cost per bar­rel range. Oil prices have gone up mod­est­ly in recent days with all the uncer­tain­ty in the glob­al mar­kets.

Spik­ing gaso­line and diesel prices have always raised inter­est in alter­na­tive fuels. Propane auto­gas has been in the $1.89 to $1.99 price range late­ly, accord­ing to Roush Clean­Tech and Clean­FU­EL USA. Com­pressed nat­ur­al gas recent­ly has been sell­ing for about $2.25 in gaso­line gal­lon equiv­a­lent in key US mar­kets, accord­ing to CNGPrices.com. Flex fuel is priced low­er than gaso­line and diesel, but high­er than both fuels if you fac­tor in the E85 MPG/BTU adjust­ed price, accord­ing to the AAA Dai­ly Fuel Gauge Report.

As for biodiesel, B20 has been get­ting some­where around $4.00 to $4.50 per gal­lon (accord­ing to AltFuelPrices.com) – a lit­tle bit high­er than reg­u­lar diesel. Fuel prices play a large part in the vehi­cle acqui­si­tion deci­sion for con­sumers, fleets, and senior man­age­ment. Resur­gent tur­moil in the Mid­dle East will like­ly raise inter­est in the fuel pric­ing trend.

Jon LeSage is Auto­mo­tive Edi­tor, Green Ini­tia­tives at Auto­mo­tive Digest. Jon also serves as Edi­tor and Pub­lish­er of Green Auto Mar­ket.



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