Rising tensions in the Middle East have pushed oil prices sharply higher over the past three weeks, forcing drivers to pay more at the pump.
Crude rose $2.66, about 3 percent, to $92.53 per barrel Thursday, crossing above $92 for the first time since late May. The price has risen about $15 per barrel since oil hit its low for the year three weeks ago. The national average price of gasoline is now $3.44 per gallon, up 11 cents since July 1.
The oil market, responding to a series of events in recent days, is concerned once again that Iran will try to block oil shipments through the Strait of Hormuz, a narrow waterway in the Persian Gulf through which one-fifth of the world’s oil travels every day.
On Wednesday Israel blamed Iran for an attack on Israelis in Bulgaria, and vowed to strike back. In the past few weeks, talks between Iran and the West over its nuclear program have failed, a U.S. Navy ship fired on a boat in the Persian Gulf and Iran has said it has devised a specific plan to block oil shipments.
“It’s raised the fear quotient,” said Tom Kloza, chief oil analyst at the Oil Price Information Service.
If oil buyers worry that oil will soon be in short supply, they buy oil futures contracts to lock in the price as insurance against future price spikes. Those purchases drive up benchmark oil prices and can eventually lead to higher prices at the pump.
Brent crude, which is used as a benchmark to price the oil used by most U.S. refineries, has jumped 22 percent in about a month. On Thursday Brent was up $2.63 to $107.76. Brent hit a low of $88.49 on June 22.
Brent would be most affected by a disruption in the Middle East because it is used to price seagoing crude that competes with crude shipped through the Persian Gulf. Also Brent, which is priced in London, has been pushed higher by lower oil production in the North Sea.
Further increases are possible over the next few weeks, to the chagrin of drivers.
“It’s going to translate to upward pressure at the pump,” said Jim Ritterbusch, an independent oil trader and analyst.
But the rise won’t likely be dramatic — or long-lived. The growth in global demand for oil has weakened in recent months as the economies of the West have sputtered and China’s economic growth has slowed. And oil supplies remain high because output has risen in Saudi Arabia, Libya, the U.S. and elsewhere.
“There’s stagnant demand, and lots of supply,” said Judith Dwarkin, chief energy economist at ITG Investment Research.
That leads analysts to think that prices won’t skyrocket unless supplies are disrupted by Middle East violence or a hurricane in the Gulf of Mexico.
Kloza said he doesn’t expect gasoline to rise much beyond $3.50 for the rest of the summer. And then, he says, gasoline prices could fall sharply as supplies increase and refiners switch to cheaper winter blends of fuel.
In other energy trading in New York, natural gas rose 1 cent to $2.96 per thousand cubic feet. Heating oil rose 6 cents to $2.94 per gallon and wholesale gasoline rose 4 cents to $2.92 per gallon.