Capital Investment Advisors

Wes Moss: Syria and Prices at the Pump

If the US decides to launch a punitive strike against Syria for alleged use of chemical weapons there could be some collateral damage to a surprising target: Your wallet.

The weapon? Gas prices.

It’s been said that markets are driven by just two things: greed and fear. For several weeks now, the major oil producers have been fretting over the implications of a US-led attack on Syria. While Syria is not a major source of petroleum, it is closely allied with Iran, which has historically provided up to 5 percent of the world’s oil and is always looking for a reason to make life difficult for the West. Iran could show its displeasure with an assault on Syria by simply cutting its oil output for a period of time. While the US and some allies have banned Iranian oil imports in an effort to pressure the country into giving up its nuclear weapons program, Iran has no trouble selling its black gold elsewhere. An interruption of supply from Iran would likely impact world prices.

Iran might also try to close the Straight of Hormuz waterway, which carries 20 percent of the world’s crude oil. The US Navy, of course, would have something to say about that. Similarly, what if military action in Syria leads to wider unrest or conflict in the Middle East? How might that impact such major oil transport systems as Egypt’s Suez Canal and Sumed pipeline?

These concerns are already affecting the market to some extent. On Aug. 28, with the US seemingly poised to strike Syria, oil prices rose to a two-year high of $112.22 a barrel. As of today the price is closer to $109 a barrel.

Oil prices in the $100-120 per barrel range represent a yellow light for the economy. Oil at $120 or higher is a full-on red light. According to the experts at, the one-year forecast is $124/barrel. Other analysts believe increased world demand and on-going turmoil will push oil to a record $150 a barrel in the coming months.

Despite the upward drift of oil, retail gas prices are — for now, at least — between the ditches. According to, Atlantans are currently paying anywhere from $3.53to $3.62 a gallon for regular gas. That’s much more that the $3.15 we paid back in December, but less than the $3.87 we were forking over one year ago.

American demand for gasoline is very inelastic. The US gulps about 375 million gallons per day. We are largely unwilling or unable to significantly reduce that consumption until the pain becomes almost unbearable. We will continue to fill-up even as prices soar. Once gas hits $4 per gallon, Americans do start to change their behavior. We will (maybe) consider a carpool, avoid driving vacations, and (possibly) park the SUV in favor of a more fuel-efficient vehicle.

Keep all this in mind as our government debates an attack on Syria. Is it worth it? Share your thoughts.

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