OAK BROOK, Ill. -- What a difference two weeks can make. On July 3, CSP Daily News asked readers how high they thought the price of a gallon of regular unleaded gasoline might go this year. Of the 339 respondents, an overwhelming 86% said the price had either already peaked (38%) or would top out at about $3.50 (48%). Two weeks later, following the Hezbollah attack on Israel, readers saw things differently, as 40% of 309 respondents to a similar question said they fully expect the price of gasoline to reach $4 a gallon, while 28% said that may happen.
The reason why [conflict in the Middle East] leads to price increases is because of the speculation that it will impact oil supply from the Middle East, Paul Rolniak, vice president of Energy Analysts International Inc., Westminster, Colo., told CSP Daily News. I can remember back in the '70s, [conflicts in the Middle East were] one of the instigators of one of the original oil embargoes.
Rolniak, however, would not speculate on how high gas price could rise as a result of the latest skirmish, noting, It could go on for quite a while or the political process could stop it tomorrow.
The fact that Iran is strategically located and they're one of the backers of Hezbollah, [raises concern] that they may threaten to cut off oil supply out of the region, Rolniak said. They've already said that they're going to use their own oil as a [bargaining tool] and that's one of the things in recent months that have kept the price of oil high. If they threaten further to directly interfere [with other supplies], then prices could go even higher. It's a volatile situation.
Ultimately, Rolniak said, tensions in the Middle East have been inflating crude-oil prices for years. If all of the political problems went away today, I think [crude-oil prices] would basically crater back down into the $40 to $50 a barrel range, he said. We're paying a premium of $20 to $30 a barrel just because of all of the political problems that are going on there.
Meanwhile, world events and rising oil demand continue to hit independent gasoline retailers hard. Bob Werniak, owner of Bob's Auto Body and Repair in Blue Island, Ill., recently turned off the pumps at the gas station he opened 40 years ago. High gas prices killed us, Werniak told the Associated Press.
Werniak said he quit ordering truckloads of gas, pulled down price signs and, on Friday, covered the handles of his gas pumps at the station and auto repair shop. And he's not sure he'll ever turn those pumps back on again. We can't afford it, he told AP, adding that just a half load of gas now costs him $14,000.
As a small business, Werniak said it is tough to compete with the gas stations with names everybody recognizes. Now, rising oil prices and escalating violence in the Middle East have triggered fears on an oil-supply disruption. As of Friday, crude-oil prices were above $78 a barrel.
For Werniak, it all adds up to the very real possibility that his 40 years in the gasoline business are over. I don't think we are ever going to open, he said. These prices are putting us out of business for good.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.