If civil unrest and protests in the middle east spreads to other countries, the price of a barrel of crude oil could rocket new levels by the summer, pushing gas prices to a record $5 a gallon in the United States.
Oil companies like BP and Statoil are pulling employees that produce crude oil from Libya, halting production and increasing the price of crude oil used to make gasoline.
“If this thing escalates and there’s a good chance that there’d be a shift in supplies, $5 gas isn’t out of the question,” says Darin Newsom, an energy tracker at DTN.
If the protests in Libya and Egypt spread to Saudi Arabia, the world’s leading produce of crude oil, even higher prices could be seen.
“If you are looking at the disruption of movement and production in countries such as Saudi Arabia and the UAE, you’re easily talking $5 gas,” says Peter Beutel, energy adviser at Cameron Hanover. “We have all the wrong things working together at the right time: an economic recovery, (stocks) making new highs, a lower dollar, strong seasonal demand and unrest in the heart of oil production.”
Speculators betting that the price of oil will rise are also pushing up prices as well.
“Above $4 a gallon, we’ll see consumers hunker down,” says economist Ryan Sweet. “It could take steam out of spending just as consumers were getting their sea legs.”
AAA spokesman Troy Green says thinks all the talk about price increases is short sighted, “I would caution folks in the prediction business,” he says. “Throwing out numbers is akin to predicting who’s going to win the Super Bowl in 2012.”