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Iran tension: Gas prices escalating in US

January 16, 2012 16:36 IST
Gas prices in Texas and elsewhere in the United States have jumped an average 7 cents in recent days after Iran threatened to close the Strait of Hormuz through which 16 million barrels of oil - about a fifth of world's daily oil trade - passes every day.

Motor club and leisure travel organisation serving North America, AAA, says analysts believe gasoline prices have gone up due to strained relations between the US and Iran.

Iran has threatened that it would close the Strait of Hormuz, which is just 45 kms wide at its narrowest point and works as a crucial waterway connecting the Persian Gulf to the Gulf of Oman, in the event of a military strike or severe tightening of international sanctions on its oil exports.

The talk of a possible closure is driving up prices, says Kent Moors, Editor of Oil Energy Investor and Author of the new book 'The Vega Factor'.

"The market now has been govern for some time by futures contracts," Moors said, adding "which means that the contracts that people are buying and selling for future deliveries of oil upwards to 6 months out. We now are into oil brinkmanship. Oil brinkmanship is unstable, it's unpredictable and it's extremely risky."

AAA Texas reported its survey found the average price per gallon has reached $3.22.

The survey found that nationwide gasoline prices rose 6 cents in the past week, to hit $3.38 per gallon.

Texarkana, Dallas and Fort Worth have the most expensive gasoline at $3.27 a gallon. The cheapest gasoline in Texas was found in El Paso, reporting $3.04 per gallon.

In the continental United States, Utah has the lowest average gas prices at $2.92 a gallon while California has the highest at $3.70 a gallon.

In 2012, analysts are estimating that national gas prices will average over $4.00 per gallon and could go as high as $5 a gallon in some places, especially if the threat of disruption to global supply continues.

Patrick DeHaan, a senior petroleum analyst for, blamed the price increases on Iran's threat to close the Strait of Hormuz. "We can look to Europe at their $6-9/gallon gasoline and be happy that we're still not paying as much as some countries."

In the year 2011, gas prices averaged over $3.50 a gallon nationwide, 72 centers a gallon higher than in 2010.

Gas prices usually go down, just like the temperatures in winter, but not this year. The average price of gas nationwide is now $3.39 a gallon. That's 29 cents more per gallon than this time last year.

Crude oil is at the highest level ever to start the New Year. Threatened embargoes and concerns that Iran might block the Strait of Hormuz are having an impact.

Analysts believe the average family is now spending about ten per cent of the household monthly budget on gas, $300 to $400 for two vehicles.

Seema Hakhu Kachru in Houston
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