Middle East turmoil could push pump prices to $4 a gallon

Middle East unrest could lift local pump prices as to as high as $4 a gallon by the summer as international crude oil futures continue to advance unabated, energy experts and analysts say.

“Following a week of unrest in the Middle East and a significant rise in crude prices, consumers can expect the price of gasoline at the pump to rise in the coming day,” said Avery Ash, manager of federal relations for AAA.

This week, investors have become increasingly concerned how a possible civil war in Libya will affect financial markets, particularly international crude oil futures.  On Wednesday, oil prices continued to skyrockets as light, sweet crude for April delivery was up 74 cents at $96.16 a barrel on the New York Mercantile exchange — the highest since October 2008.

And although Libya only exports some 1.2 million barrels of crude a day — about 2 percent of the daily global production — market traders and analysts responded to news of Libya’s violent military response to protest with concerns of a possibly serious disruption in worldwide oil supplies.

"This is much scarier than what we experienced in 2008 when gasoline went over $4,” said Steve Verona, CEO of MyGallons LLC, an online service that allows consumers and businesses to pre-purchase fuel online and lock-in the current prices.

Those same concerns are already being felt in Arkansas communities and other local U.S. markets, where pump prices are touching new highs. As of today, Missouri and Wyoming are the only remaining states with an average price for regular gasoline below $3 per gallon.

“The current national retail average price for a gallon of self-serve regular gasoline is $3.17,” AAA’s Ash said on Monday. “This price is unchanged from yesterday, but up five cents from week ago and 52 cents from a year ago.”

In Arkansas, local pump prices are averaging $3.07 a gallon, up eight cents from a week ago and 53 cents higher than a year ago, according to AAA’s daily fuel gauge report. Retail diesel prices are averaging about $3.48 a gallon, a whopping 74 cents higher than the same period a year ago.

Pump prices in Arkansas’ metropolitan areas range from a low of $3.05 per gallon in Pine Bluff and Little Rock to a high of $3.09 in Fort Smith and the Fayetteville-Springdale area. Motorists in Little Rock and Texarkana are paying about $3.05 and 3.07 per gallon, respectively, to fill up their tanks.

Meanwhile, the U.S. Energy Information Administration will release its weekly petroleum report on Thursday (Feb. 24), postponed a day later because of the Presidents’ Day holiday.

Earlier this month, the EIA forecasted that it expects crude oil prices to average about $93 per barrel in 2011, $14 higher than the average price last year. The EIA expects regular-grade motor gasoline retail prices to average $3.15 per gallon in 2011, 37 cents per gallon higher than the 2010 average, and $3.30 per gallon in 2012, with prices forecast to average about 5 cents per gallon higher in each year during the peak driving season (April through September).

Still, the EIA’s next short-term forecast on March 8 could change given the current market unrest.

“There is also significant uncertainty surrounding the forecast, with the current market prices of futures and options contracts for gasoline suggesting a 35 percent probability that the national monthly average retail price for regular gasoline could exceed $3.50 per gallon during summer 2011 and about a 10 percent probability that it could exceed $4.00 per gallon,” the EIA said in its short-term outlook on Feb. 8.

Others like Verona expect local pump prices to jump even higher. The MyGallons chief said over the past few weeks coinciding with Middle East turmoil, his Miami-based company has generated the highest increase in sales in 3-year history of “hedging” gas prices for consumers.

“Today we are dealing with increasing demand like 2008 compounded by the very serious situation in the Middle East,” Verona said. “The events in Egypt and Libya have had little actual impact on energy supplies and yet the price of oil has increased significantly. If the turmoil spreads to countries such as Saudi Arabia, oil and gas prices could double in a matter of days."