Drivers heading out for the Independence Day holiday face the highest gasoline prices since 2008 thanks to Iraq tensions, but $5-a-gallon record-breaking prices are out of the question.
Crude prices haven't even gained more than $1 a barrel on the New York Mercantile Exchange since turmoil in Iraq hit the headlines in the first half of June.
"North American oil prices have advanced by just a few pennies since Iraqi violence put a question mark around the future stability of supply, but U.S. consumers will still see the most expensive July 4th gasoline prices in six years," according to analysts at GasBuddy.com.
Despite the fact that U.S. oil production is as high as it's been since October 1986 and gasoline should be well supplied in all states during the holiday, "fear about what could happen if Iraqi exports fall prey to violence has altered the calculus for summer oil prices," said GasBuddy chief oil analyst Tom Kloza.
Nymex crude futures closed at $104.35 a barrel June 10, when militants known as the Islamic State of Iraq and Syria (ISIS) captured Mosul, Iraq's second-largest city. Oil futures have gained 99 cents since then, closing at $105.34 as of Tuesday's settlement.
Fuel prices have also climbed, modestly — with the average price for regular gasoline up just about 2 cents since then as of Monday's $3.676 a gallon, according to AAA .
"The big news to us is that gas prices were heading down before the fall of Mosul," said Michael Green, a spokesman for AAA. "Gas prices typically fall in June, but we didn't see that this year due to the renewed conflict in Iraq. Most consumers are paying about 15-20 cents per gallon more than they would have been paying otherwise."
AAA had predicted about a month ago that national average gasoline prices could decline 10 to 15 cents a gallon in June, as refineries complete maintenance and raise output for the summer driving season. But the "unexpected events in Iraq," prevented that from happening, the leisure travel and motorist group said in its monthly gas price report.
The average price of gas in June was $3.67 a gallon — the most expensive for June since 2011 and the highest average for any month since March of last year, according to AAA.
The U.S. isn't as dependent on Middle Eastern oil as it was even as recently as three years ago, according to GasBuddy.com, a source for real-time local gas prices.
Still, "the global market could be nervous about Iraq from now through the peak weeks of the Atlantic hurricane season," and the "potential loss of all or part of the 2.6 million-barrels-per-day of Iraqi oil that moves to consuming countries may keep prices higher than they might be under more peaceful circumstances," GasBuddy.com analysts said.
That makes sense, given that 66% of the price for a gallon of gasoline is crude oil.
Ryan Mossman, vice president and general manager of FuelQuest's Fuel Services, expects gasoline prices to "curb to levels more in line with this time of year over the coming weeks unless the conflict in Iraq moves to southern Iraq, where the majority of the countries' fuel supply lies."
During the past three years, he said, retail gasoline prices have declined during the period between Memorial Day and June 25, pointing out a 2.3% fall in 2013 and declines of more than 7% each for that period in 2012 and 2013.
This year, however, they climbed 1%, said Mossman.
Higher-than-usual prices, however, don't translate into record high prices.
An article in the New York Post that ran in late June suggested that Wall Street sees the possibility of $5-a-gallon gasoline this summer.
That's "not likely" — even if the world sees a total loss of Iraqi exports, said GasBuddy's Kloza.
"The closest we ever came to $5 a gallon gasoline was October 2012, when a cluster of California refining problems sent prices [in that state] to about $4.67 a gallon," he said. "Pump prices spent little time there and dropped by more than $1 a gallon by year's end."
If the market lost the 2.6 million barrels a day of Iraqi oil exports, the world would see global oil prices move above $125 a barrel or maybe even $135 a barrel, but those prices would be limited to continents other than North America, he said.
For the U.S. to see $5-a-gallon gasoline or higher, U.S. crude prices would have to top $175 a barrel, according to Kloza, who points out that with U.S. crude at a discount to world crude, the U.S. is a "bit insulated."
For now, he said the national price for a gallon of regular gasoline this week and for the holiday weekend is likely to average in the $3.67 to $3.70 neighborhood.
And that's not likely to faze holiday travelers.
AAA forecasts that 41 million Americans will travel 50 miles or more by car during the holiday weekend despite the high gas prices. That's up 1.9% from the number who traveled last year and up nearly 14% from those who traveled during the Memorial Day weekend.