With the recent conflicts in the Middle East and North Africa, gas prices have hit an ominous milestone.
Since the turmoil in Libya broke out in mid-February, the price of crude oil has jumped roughly 20% to more than 104 dollars a barrel, pushing up prices at the pump as well.
In some areas, gas prices are as high as four dollars! Problem is that according to the International Energy Agency, Libya has halted between 850,000 and 1.0 million barrels per day (bpd) of the country’s total of 1.6 million bpd. But if turmoil and instability will continue, Libya may halt the entire production.
The jump was the biggest since a 38-cent hike between August and September 2005. At the time, the price increase was driven by damage caused by Hurricane Katrina. Analysts say prices of $4 a gallon could have some serious implications including the further slowdown of economic recovery. A gas record price of $4.11 a gallon was achieved on July 17, 2008.
Unfortunately, with the increased tensions in the Middle East, China’s growing oil consumption and the impending arrival of the summer driving season, gas prices are not likely to abate any time soon.
According to Reuters, the U.S. government reiterated that it could tap its strategic oil reserves to safeguard economic growth.
Tapping into the oil reserve “has been done on very rare occasions,” Daley said on NBC’s “Meet the Press.”
“There are a bunch of factors that have to be looked at, and it’s not just the price,” he said.
“We’re looking at the options,” including drawing on the Strategic Petroleum Reserve, Chief of Staff William Daley said. “It is something that only is done — and has been done — in very rare occasions. There’s a bunch of factors that have to be looked at.”
The 727-million-barrel U.S. Strategic Petroleum Reserve is the largest stockpile of government-owned oil in the world. It was established after the 1973-74 shortage created by the Organization of Petroleum Exporting Countries cut off oil over U.S. support for Israel in the Yom-Kippur War.
Oil analysts expect prices to peak at $3.75 by the end of the year.