TOWSON – The national average price for a gallon of gas shot up four cents overnight, while Maryland’s average rose three cents, raising fears that pump prices will continue to escalate in the wake of the ongoing turmoil in Libya. Political unrest in the region is unnerving traders in future markets across the globe.

Current and past gas price averages:

Regular Unleaded Gasoline (*indicates record high)

West Texas Intermediate crude oil futures hit $100 at one point during intraday trading on Wednesday, a high not seen since October 2008, but closed at $98.10 a barrel on the New York Mercantile Exchange (NYMEX), an increase of over $13 from a week ago.  Oil is the biggest single component of the cost for retail gasoline prices.  The escalating violence in Libya, which produces about 1.7 percent of the world’s supply of crude, is causing fears that gasoline prices could hit five dollars a gallon by the peak of the summer driving season. The danger is, cautions AAA Mid-Atlantic, this could become a self-fulfilling prophecy.

“A sharp spike in crude oil prices is always a major concern to motorists, who are constantly concerned about the impact of higher pump prices on their household budgets and their travel plans, particularly during the summer driving season,” said Ragina C. Averella, AAA Mid-Atlantic’s spokesperson. “It is inevitable that gasoline prices will rise as its price generally tracks crude oil prices.  Thus the price of crude oil is a major factor in what motorists pay at the pump.”

Is $5 gas in the realm of possibility? That nightmare scenario is unlikely, observes AAA Mid-Atlantic.  Here’s why.  Based on historical data, the price of crude would have to soar to unprecedented highs – of $168 per barrel – before consumers pay a retail average of $5.00 a gallon. “You can never say never, but the situation would have to rapidly deteriorate in the region before we actually see oil prices that high,” said Averella.

To reach those heights, the price of crude would have to surpass its previous benchmark record of $148-$150 a barrel, which pushed pump prices to an all-time record high of $4.11 nationally on July 17, 2008.  Maryland’s record high average price reached $4.05 a gallon a month earlier on June 17, 2008.  During the first quarter of 2010, “crude oil alone made up 69 percent of the price to consumers at the gasoline pump,” according to the American Petroleum Institute (API). 

Fluctuations in crude oil prices are the most significant cause of gasoline price swings over the long term, according to the industry.  However, if the situation worsens in Libya, the Organization of Petroleum Exporting Countries (OPEC), of which Libya is a member, is likely to authorize the production of more crude oil, as many economists hope.  This scenario will help prices move back below $100 per barrel, oil analysts explain.

Currently, Libya’s oil production capacity averages “1.8 million barrels per day (bpd),” according to estimates by both the U. S. Department of State and the U.S. Energy Information Administration (EIA). “But that’s only a drop in the bucket,” said Averella. The United States continues to import 9.6 million barrels a day. In fact, the United States imports more than 60 percent of its petroleum needs and is dependent upon world oil markets.

Situated in North Africa, Libya is home to the largest proven crude oil reserves on the African continent, followed by Nigeria and Algeria. In fact, “the United States imported an average of 80,000 bbl/d from Libya in 2009, up from 56,000 bbl/d in 2005 but, as a result of the U.S. economic downturn and subsequent decline in oil demand, 2009 levels were below 2007 highs of 117,000 bbl/d,” according to EIA estimates. 

Libya’s economy depends primarily on revenues from the oil sector.  During 2009, the “vast majority of Libyan oil exports were sold to European countries like Italy (425,000 bbl/d), Germany (178,000 bbl/d), France (133,000 bbl/d), and Spain (115,000),” according to the EIA.  With the lifting of sanctions against Libya in 2004, by an Executive Order signed by President George W. Bush, the United States has increased its imports of Libyan oil.  However, at 1.9 million barrels per day, Canada remained the largest exporter of total petroleum to the United States, according to data from the U.S. Energy Information Administration.

Even before the protests and political upheaval erupted across the Middle East and North Africa, Tom Kloza of OPIS, a leading oil analyst, was already predicting that gasoline prices would soar to the $3.50 to $3.75 range by springtime before drifting lower to between $3.00 and $3.40 a gallon, notes AAA Mid-Atlantic. However, Libyan leader Mu’ammar Abu Minyar al-Qadhafi is the wild card, some analysts fear.