Gas Hits $8 on Iran Showdown? image

Iran may see gas prices up to $8 if it acts to close the Strait of Hormuz to oil-tanker traffic near the beginning of 2013, cutting global economic growth by more than 25%.

Iran may cause disruption of global sales oil suppliers for about 3 months by laying mines in the 6-mile-wide shipping passage that the U.S. and its allies would have to find and remove. It is worth mentioning that about 17 barrels of oil pass each day through the strait, or nearly 20% of the global market.

Brent’s oil prices, the benchmark European oil, may briefly hit $240 a barrel in the first quarter of the following year. On Thursday, March 23rd, Brent closed at $123.07 in London and in the U.S. at $105.35 a barrel.

“If it did hit $240, you’re looking at about a doubling of where gas prices are now,” said Jim Burkhard, managing director of the global oil group at IHS CERA, the firm’s energy-research arm. “And the U.S. is at $4.”

The world has only 1.8 million to 2.5 million barrels a day of unused production capacity, down from 6.2 million in 2009. If gas prices doubled, this means that consumers could spend up to $145 a month for gasoline.