Crisis in Iraq Sends Oregon Fuel Prices Soaring

Diesel prices are holding fairly steady. Oregon’s average gained two cents to $3.94.

(PORTLAND, Ore. ) - Gas prices are edging up as violence in Iraq has intensified.

The national average for regular unleaded adds two cents this week to $3.66 a gallon while the Oregon average gains three cents to $3.93, which is the year-to-date high. In fact, all of Oregon’s measured metro areas are at their peak price so far for 2014.

AAA Oregon/Idaho Public Affairs Director Marie Dodds says, “AAA predicted that drivers would pay relatively high prices for gasoline this summer, with the national average ranging from $3.55 to $3.70 a gallon and Oregon’s average from $3.75 to $3.99. However, these prices could climb higher if unrest in Iraq escalates or disrupts oil production in the region.”

The national average reached its year-to-date high of $3.70 on April 28, but that could be eclipsed in the coming days. Oregon’s current average of $3.93 is the year-to-date high, and will likely climb a bit more before prices settle down.

The Oregon average could breach $4 a gallon given the global run-up in crude oil prices, but unless there’s a major disruption to supply in the Middle East, prices are not expected to climb much higher than that. The last time Oregon’s average was at or above $4 per gallon was on Oct. 20, 2012.

Gas prices often decline in June with the national average falling the previous three years at an average of about 20 cents per gallon. The recent turmoil in Iraq is likely to prevent that trend from repeating this year.

A year ago the national average was turning lower as domestic production and distribution issues eased, although market watchers were keeping a close eye on geopolitical tensions in Syria.

While Syria is not a major oil producing nation, there was concern that fighting might spread to other countries in the region, which kept some upward pressure on crude oil prices.

Drivers in Hawaii, California and Alaska continue to pay more than $4 per gallon for regular unleaded gasoline, a trend that has lasted for 24 days. California, Washington and Oregon all remain in the top 10 most expensive states. California is second, Washington is fourth and Oregon is eighth.

Prices have remained relatively stable (+/- 2 cents) in 34 states and the District of Columbia over the past week, however consumers in five states (Montana, Ohio, Illinois, Arkansas and Missouri) have seen prices climb a nickel or more: Montana and Ohio (+6 cents) and Illinois, Arkansas, and Missouri (+5 cents).

The overall picture for the states is reflecting a bit of regional variation, especially when looking at the month-over-month and year-over-year averages. Oregon is one of 29 states and the District of Columbia where the current average is at least a dime more than it was a year ago.

The biggest price drop has been in North Dakota (-26 cents) and the biggest price increase is in Pennsylvania (+23 cents) compared to a year ago.

The month-over-month picture reflects a similar view of price volatility. Oregon drivers are paying six cents more than a month ago. Consumers in Michigan are paying 20 cents a gallon more than a month ago, while drivers in Alabama are paying 11 cents less than a month ago.

Much of the attention of global market watchers has shifted from Ukraine and Russia, to widespread violence in Iraq. According to the U.S. Energy Information Administration, Iraq has the fifth largest proven oil reserve in the world and is the second largest producer of crude oil in the Organization of the Petroleum Exporting Countries.

Markets will continue to monitor the conflict closely due to the potential for violence to spread to neighboring oil producing nations, and the overarching regional foreign policy implications associated with an Iraqi civil war.

After a run-up late last week, crude oil prices are relatively steady to start the week. At the close of Monday’s formal trading on the NYMEX, West Texas Intermediate (WTI) crude oil settled at $106.90, just a penny shy of Friday’s settlement, which was the highest since September 18.

Today WTI is trading around $106 compared to $104 a week ago. Crude prices are up about three percent over the last month, and are about $9 a barrel more than a year ago.

For the fourth week in a row, there are three states with regular unleaded at or above $4 a gallon: Hawaii, California and Alaska. For the 21st week in a row, there are no states with an average below $3 per gallon, and no states within a dime of this mark for the 17th week in a row.

Hawaii has the most expensive gas in the country for the 86th consecutive week at $4.36, followed by California at $4.10 (down a penny and second most expensive for the 18th week in a row), Alaska at $4.08, Washington at $3.94 (up two cents and fourth most expensive for the second week in a row), and Michigan at $3.94.

Oregon is eighth down from seventh last week at $3.93 (up three cents). Idaho is 23rd for the third consecutive week at $3.63 (up a penny). Mississippi bumps Arkansas as the state with the cheapest gas in the country at $3.40 a gallon (up half a cent).

Diesel prices are holding fairly steady in most markets. The national average slips a penny to $3.89 a gallon.

Oregon’s average gained two cents to $3.94. Diesel is at or above $4 a gallon in 12 states (including the District of Columbia), down from 15 last week.

Hawaii is most expensive at $4.84, followed by Connecticut at $4.33, New York at $4.27, Alaska at $4.18 and California at $4.13 (same price as last week and up from sixth last week). Washington is eighth up from ninth last week at $4.05 (up a penny).

Idaho is 17th down from 15th last week at $3.97 (down four cents). Oregon is 20th up from 23rd last week. A year ago, the national average for diesel was $3.85 and Oregon's was $3.91.