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Refinery attack in Iraq may cause gas prices to rise

Refinery attack in Iraq may cause gas prices to rise
Refinery attack in Iraq may cause gas prices to risePhoto by Joe Raedle/Getty Images

According to The New York Times, the largest refinery in Iraq has been taken over by Islamic militants after being attacked on Wednesday.

Iraq’s Prime Minister Nouri al-Maliki had conveyed the message that the refinery would not fall and that the militants would be defeated. However, an anonymous source gave news provider Reuters a less optimistic picture. The source stated that “The militants…are in control of the production units, administration building and four watch towers. This is 75% of the refinery.”

This refinery is the second largest refinery in OPEC, The Organization of the Petroleum Exporting Countries. OPEC coordinates the petroleum policies among its member countries, including Iraq.

This attack is a continuation of violence in this area. Explaining the roots of the conflict, Senator Richard Shelby, R-Ala., stated: “This underlying conflict has been going on 1,500 years between the Shias and the Sunnis and their allies. And I think whatever we do, it’s not going to go away.” The production at the attacked refinery not only influences fuel used for cars, but also cooking oil. Despite the very recent nature of the fuel refinery attack, fuel shortages and long gas lines have already occurred.

The refinery that was attacked, located in Northern Iraq, has been said to supply domestic fuel only. However, concerns persist that if a decline in oil availability occurs, the cost of oil to U.S. consumers could spike. On Friday, the NYMEX cost for a barrel of oil closed at $106.91. According to the U.S. Energy Information Administration, the regular price for a gallon of gas in the U.S. as of June 16 was $3.686 per gallon. If Iraq’s oil goes off line, gas prices could rise to $200 per barrel. According to GasBuddy.com, consumers in some states are already seeing an increase at the pump.

Are you concerned about a potential gas price increase? What is the most you're willing to pay for gasoline? Share your thoughts about the crisis in Iraq in the comments section below.

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