by Michael Snyder, The Economic Collapse Blog:
Can you imagine paying seven dollars for a gallon of gasoline? It could soon happen, because it appears that Israel is about to strike Iran, and that is likely to cause events in the Middle East to spiral completely out of control. Right now, approximately one-fifth of all oil used in the world goes through the Strait of Hormuz. An apocalyptic war in the region could potentially close the Strait of Hormuz until the conflict is resolved one way or the other. In addition, oil infrastructure could be destroyed in Iran and other nations in the Middle East as the fighting rages, and that could substantially reduce global oil production for an extended period of time. Our way of life depends on cheap oil, and so if a major regional war in the Middle East causes the price of oil to go skyrocketing that is going to deeply affect all of us.
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On Monday, the average price of a gallon of gasoline in the United States was just $3.63…
The average price for a gallon of regular gas in the U.S. was $3.63 as of Monday, according to AAA, up almost 4 cents from a week earlier and 22 cents from a month ago.
Even though the average price of a gallon of gasoline has risen more than 20 cents in a month, I would still consider it to be at a very low level, especially compared to what is eventually coming.
One expert that was interviewed by MarketWatch is warning that the average price of a gallon of gasoline in the U.S. could hit $5.40 this summer…
Colas estimated that a spike in oil prices pushing U.S. gasoline to $5.40 a gallon this summer would make a recession later in 2024 “a genuine possibility.” U.S. gas prices averaged $3.634 a gallon at the pump on Monday, according to AAA, at last check.
And that same expert also warned that if the price of oil reaches $125 a barrel it could push the U.S. economy into a recession…
“Crude prices are our chief concern, but we are a long way” from $125 a barrel — a level of West Texas Intermediate oil that “would almost certainly cause a recession if sustained,” said Colas. “Gasoline prices are the transmission mechanism between Mideast conflict and the US economy: when pump prices increase quickly, consumers must cut back on other spending.”
Personally, I think that such a projection is wildly optimistic.
If Israel and Iran start lobbing thousands of missiles at one another, we could easily see the price of oil surpass $150 a barrel, and it is likely that the average price of gasoline in the U.S. would shoot past $7.00 a gallon.
And if nuclear weapons are used in the Middle East, there is no telling what might happen.
Right now, the financial markets are waiting to see if Israel chooses to retaliate.
If the Israelis strike Iran, and oil infrastructure is targeted, that will definitely “send oil prices up”…
If Israel does retaliate, and it becomes a full-fledged conflict, that’s a different story. “And maybe Iran’s oil platforms, refineries are taken out,” he said. “That would send oil prices up.”
I think that is what is going to happen.
At this moment, it is being reported that Israel is preparing to retaliate.
When that occurs, the price of oil will go nuts, and people all over the U.S. will blame Israel for the high price of gasoline.
But instead, they should blame Hamas, Hezbollah and Iran.
If they would have just left Israel alone, things could have turned out much differently.
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