As Iraq tragically plunges further and further into a violent conflict that threatens to restructure the nation’s government following the U.S.-led invasion that had a similar outcome just a few years ago, economic analysts are concerned about the effect the war will have on oil prices throughout the globe.
The price of oil rose Wednesday as Sunni militants acting on behalf of ISIS struck the country’s largest refinery in northern Iraq. According to NBC News, Brent crude oil prices rose 17 cents to $113.62 a barrel, although U.S. crude dipped 6 cents to $106.30 a barrel.
Wall Street traders have taken notice of the oil price swings, worrying that the conflict in Iraq could spread to the south of the country and weaken oil production in that area.
“The spike in energy prices is a problem, since it isn’t coming on rising demand, just concerns about supply. High energy prices are sand in the gears of economic activity,” said John toohey, head of equities at USAA Investments in San Antonio, according to Reuters.
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As the future of Iraq’s oil production and export business remains uncertain, analysts have been unable to predict how far costs will rise. Some claim that it could reach as high as $125 to $150 per barrel of Brent crude oil, costs similar to the large spikes that occurred in 2011 and 2008, respectively.
The Obama administration is still weighing options as to how to respond to the actions of the growing Sunni insurgency. A major concern is that Iraq’s central government could attempt to avoid full-scale civil war by granting land to to the Sunni and Kurd populations, which would also result in sharing the nation’s oil.