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Tags: Drought | Mideast | Gasoline | Prices

Drought, Mideast Tensions Might Push Gasoline Prices Higher

Friday, 20 July 2012 11:36 AM EDT

Gasoline prices could rise in the near future due to a crippling drought and escalating Mideast tensions, experts say.

An ongoing drought has more than 50 percent of the country in its grip, decimating corn crops and sending gain prices rising on supply concerns.

Tensions between Iran and Israel are building again after an attack on Israeli citizens in Bulgaria — Israel says Iran was behind the attack.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

Mideast tensions send fuel prices rising, but drought conditions are sending prices at the pump higher as well.

Ethanol has risen from just below $2 a gallon in the beginning of June, to $2.75, said John Kilduff of Again Capital, according to CNBC.

“There’s open debate about whether or not the ethanol mandate will be suspended if things get much worse for the corn crop,” said Kilduff, according to CNBC.

Ten percent of every gallon of motor fuel consists of ethanol, according to government mandates.

“Ethanol was contributing to a lower price for gasoline than we would have paid earlier in the year. Now that discount has disappeared thanks to higher ethanol prices,” said OPIS analyst Tom Kloza, CNBC added.

Expect gasoline to hit a nationwide average of $3.60 in August, Kloza added.
Prices currently stand at $3.45 a gallon, according to AAA's Daily Fuel Gauge Report.

Tensions between Iran and the West hit a fever pitch earlier this year, with the former accusing the latter of developing a nuclear weapons program, a charge Tehran denies.

Iran has threatened to close the Strait of Hormuz, a narrow waterway connecting oil-rich Persian Gulf countries with the rest of the world, to protest sanctions from the West related to its nuclear ambitions.

Iran agreed to talks with delegates from the United States, United Kingdom, China, France, and Russia and Germany to ease tensions, which had kept prices lower up to now.

Cooling global economies have also sent prices falling, until now.

"The retail price may well have bottomed out," said Trilby Lundberg of the Lundberg Survey, which conducts surveys on fuel prices, according to Reuters.

"Crude oil prices turned around during the period, and we are in our seasonal period of higher consumption. Lower prices are also an incentive for consumers to drive more, including to work."

The Lundberg Survey said the national average price of self-serve, regular gasoline was $3.41 on July 13, down from $3.48 on June 22, and from $3.62 a year ago, Reuters added.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

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Friday, 20 July 2012 11:36 AM
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