NEW YORK - Escalating tensions in Iraq spilled over to energy markets again Thursday, pushing crude oil prices to eight-month highs and setting the stage for stubbornly high gasoline prices in the U.S. to rise even further.
Benchmark West Texas crude oil jumped $2.31 to $106.71 a barrel and Brent crude surged $3.21 to $113.16 as oil-rich northern Iraq descended into chaos and militants threatened to seize control of the south, where much of the nation's daily 3.4 million barrel ouput is refined. Gasoline futures climbed 8 cents to $3.08 a gallon on the New York Mercantile Exchange.
The jumps are likely to drive the price of regular unleaded gasoline - now about $3.64 a gallon - up five to 10 cents in the coming days and keep summer prices elevated, says Tom Kloza, senior energy analyst for gasbuddy.com.
"We're not looking at a Gas-zilla event, it'll probably be a slow drift higher rather than skyrocketing,'' he says.
Iraqi oil production has already been cut by about 10%, or about 300,000 barrels a day, since March.
"The question is who is going to fill the gap? Saudi Arabia? That's what the market is looking at,'' says John Kingston, global news director for industry tracker Platts Energy.
Gasoline averaged $3.58 a gallon between Memorial Day and Labor Day last year. But retail prices have averaged about $3.65 for the past month - unlike 2011, 2012 and 2013, when prices plateaued weeks ahead of peak summer driving season. This year, higher demand, lower-than-expected supplies and declining output from Libya and other exporters propped up crude oil prices before militants escalated their attacks.
Oil's price rise grounded airline and other fuel-dependent transportation stocks Thursday. Among them: United Continental Holdings, down 6% to $42.60; American Airlines; down 5% to $40.20; Delta; down 5% to $38.50 and JetBlue, down 5% to $9.94. Federal Express eased 2.5% to $139.21.