Iraq War Increases Gasoline Prices

There’s another reason for Americans to hate ISIS (the Islamic State of Iraq and Syria), the bloodthirsty terrorist cadre formerly known as Al-Qaeda in Iraq. ISIS’s latest military offensive is causing gasoline prices to go up and up.

ISIS soldiers on the March

ISIS soldiers on the March

Gas prices have already gone up by 5¢ a gallon in Washington, DC, and 7¢ a gallon in Delaware, the American Automobile Association (AAA) reported. AAA PR man Michael Green thinks that fighting in Iraq will cause U.S. gas prices to increase an average of 14¢ a gallon over the summer.

The average price of a gallon of gas is currently around $3.66 a gallon, so that means prices would increase to around $3.80, which was the price in April. What’s truly frightening is that prices could get a lot higher if the war heats up.

The war in Iraq has already shut down a major pipeline between Turkey and Iraq and a major refinery in Tikrit, Iraq, Time magazine reported. That effectively reduced Iraq’s oil production by around 550,000 barrels.

The situation could get far worse if ISIS were able to overrun Baghdad and attack oil fields in southern Iraq, where most of the country’s oil is. Some analysts have predicted dramatic gas price increases if that happens because Iraq is the world’s seventh largest oil producer.

It isn’t clear if ISIS has the forces to do that or if they could resist the Iranian Army, which will probably position itself to defend Bagdad from ISIS. The Iranians regard ISIS, a Sunni Muslim organization, as their enemy because they are Shia Muslims. Among other things, ISIS is out to kill all Shia and destroy Shia shrines in Iraq.

The outcome of the conflict in Iraq is uncertain, but its impact on American drivers is quite clear. The real winners from the Iraq conflict will be the creators of alternative fuel vehicles.

ISIS Helps Elon Musk

A major beneficiary could be Tesla Motors (NASDAQ: TSLA) and its colorful leader, Elon Musk. In February Musk announced plans for a massive Giga Factory that would churn out vast numbers of lithium ion battery packs for electric cars. The $5 billion Giga Factory will be built at one of four locations in the western United States, possibly in Reno, Nevada. Fortune reported that the Giga Factory could produce enough battery packs to power 500,000 vehicles by 2020.


Musk also claimed that Tesla will bring out an electric car with a 200-mile range by 2016, Motor Authority reported. If that’s true, Tesla could finally become a serious contender in the auto business.

If continued violence in the Middle East keeps driving up gas prices, Musk and other advocates of alternative fuel vehicles, such as Toyota’s Vice President for Automotive Operations, Bob Carter, an outspoken booster for hydrogen fuel cells, will look like visionaries.