Crisis in Iraq drives gas prices up

The crisis in Iraq is driving oil prices higher.

Oil closed in London on Wednesday at $114 a barrel. That's up about $6 in the past two weeks.

Gasoline prices are heading up, too.

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Money spent on gas could be helping the economy move forward
CBS News

The cost of a gallon of gas often goes down this time of year, but it's already 6 cents higher than a year ago largely because energy traders are worried about the potential loss of production from Iraq's southern oil fields.

"If the fighting spreads to Baghdad, and then it threatens that region, then it would threaten exports," said Tom Kloza, who follows prices at GasBuddy.com. "And the world, despite the U.S. growth and production, the world is very delicately balanced right now, in terms of crude oil supply and demand."

The cost of crude accounts for 65 percent of the price of gasoline at the pump.

Profits are already taking a hit at Abel's Fine Furniture Movers in Dallas, where Janelle Garcia has trucks running six days a week.

The gas-price increase seems to be hitting in the worst season for the company.

"Yes, you're correct on that," Garcia said. "This is our busiest time. Therefore, we are having more trucks out, more guys out, more fuel. We're having to constantly worry about filling up."

Just 4 percent of U.S. oil imports come from Iraq, but the 6-cent increase in the cost of a gallon of gas has pulled $163 million a week out of the pockets of American consumers and businesses. That's money that could be helping to move the economy forward.

Garcia may have to drop plans to buy new trucks and vans this summer.

"We're having to compensate for the extra money going towards gas instead of going towards another vehicle," she said.

One rule of thumb is that a $10 increase in the cost of a barrel of crude cuts global economic growth by 0.2 percent. Other oil exporters, including the U.S., can make up for the loss in Iraqi production, but that takes time.

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Energy traders are worried about production in Iraq's southern oil fields
CBS News

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