Gas prices in the United States will continue to rise as OPEC's second-largest oil producer fends off total collapse at the hands of extremists, experts say.
The price of oil rose to $107 yesterday as the crisis in Iraq reached a fever pitch. Oil prices rose more than 4 percent this week alone, and experts are worried the continued violence could have an ongoing effect on prices at the pump.
"The violence and turmoil in Iraq is already affecting oil prices and have boosted the price to a 10-month high," said Mary McGuire, director of public and legislative affairs at AAA Southern New England. "It's likely that we'll see an increase this week or the week after at the pump as the result of our new oil prices."
Fear in oil-producing countries can have a drastic effect on the bottom dollar.
"It creates something called the rift premium, and that is the premium you add to the price of oil or gasoline based on the fact that there is a fear that there will be a disruption or supply of oil and gasoline," McGuire said. "When we see turmoil in Iraq it has an impact, and that's what we're coping with."
Americans can expect a 7-cent increase at the pump within the next two weeks, based on the ever-increasing price of crude oil, according to Mike Montgomery, a U.S. economist. Whether that price rises more depends on whether Iraq stabilizes.
"It could turn into a chronic, nasty struggle between factions," Montgomery said.
If the Islamic State of Iraq and Syria — known as ISIS — wants to take power in Iraq, they're going to want the money from the oil fields, Montgomery said. For now, there's "total uncertainty" surrounding the conflict, he added.
That uncertainty causes the market to react.
"Iraq is not trivial in the world oil market," Montgomery said. "It's a matter of how fast the market can get a handle on how long the supplies could be affected."
President Obama yesterday said the United States would not be "dragged back" into military action in Iraq as long as leaders in Baghdad refuse to reform a political system that has left the country vulnerable.
Obama ruled out putting American troops on the ground, but said he was considering a range of other options drawn up by the Pentagon.
Administration officials said those options include strikes using drones or manned aircraft, as well as boosting surveillance and intelligence gathering.
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