NEW YORK (MainStreet) Be prepared to see higher gas prices at the pump with global demand ramping up and the threat of military actions in Syria rising, industry experts said.
The political turmoil in Syria is just one factor as oil prices reached a six-month high on August 27, and stability in the Middle East is being tested again.
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Global oil prices are often affected by geo-political events, and fear of a disruption in supply and production can push up wholesale and retail prices temporarily.
Still, consumers may not see any direct or immediate effects, since Syria does not export oil, said Gary Lefort, an international business professor at American International College in Springfield, Mass. However, continued unrest may lead to a situation where other Arab countries such as Iran decide to cut back on oil production, creating a disruption in the Middle East.
The potential fallout from a disruption in oil prices is driving prices up, said Brian Youngberg, a senior energy analyst at Edward Jones in St. Louis.
"Oil prices are up mostly in response to the threat of military actions in Syria and the potential fallout from that," he said. "However, prices are also responding to solid demand figures in both the U.S. and China. The outlook for global demand in general has improved. This is reflected in how the 12-month strip, a good proxy for market expectations over the next 12 months, is up 4% in the last week to $103. Syria is a key driver, but it is not the only driver."
U.S. consumers could see indirect consequences.
If the political situation continues to deteriorate, it could have an impact to other countries in the Middle East, said Lefort.
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Syria is likely to turn to Iran for assistance, and Iran could retaliate by cutting back on the production of oil or even closing down the Strait of Hormuz, he said. Syria could also respond by asking Hezbollah to take counteraction against Israel, which is already starting to posture itself for a possible counterattack from various terrorist elements. Other countries such as Libya and Algeria are both "unsettled" right now, and both countries could cut back on oil production, further impacting oil prices.
If the U.S. intervenes, it would be best if the United Nations supported their actions, Lefort said.
"It can open up a Pandora's box and you never know the consequences of that action, directly or indirectly if you start using military interdiction," he said. "It could alienate support from the Arab world."
--Written by Ellen Chang for MainStreet