Gas prices could climb to more than $5 per gallon this year if Washington can’t reach an agreement by August 2. Yesterday oil prices increased to nearly $100 per barrel as legislators battled over an agreement on the U.S. debt limit and the American dollar weakened over uncertainty about the economy.
While congressional leaders bickered over spending and raising the borrowing limit ahead of an Aug. 2 deadline, the dollar fell sharply against the euro and other currencies on Tuesday. That tends to raise the price of oil, since crude is priced in dollars and a weaker dollar makes oil more of a bargain for traders using other currencies.
“A U.S. government default that causes institutional investors to dump U.S. government bonds, triggering a plunge in the dollar, pushing up oil’s price,” according to the International Business Times. The report said the bickering could push oil prices higher, which would eventually show up at the pump and trickle to other parts of the economy.
Yesterday Benchmark West Texas Intermediate crude for September delivery rose 39 cents to settle at $99.59 on the New York Mercantile Exchange. In London, Brent crude gained 34 cents to settle at $118.28 per barrel on the ICE Futures exchange.
Sustained unrest in oil producing nations in the Middle East or Africa also could also lead to $5 gas, along with increased oil demand from emerging nations that could lead to an energy crisis.
The national average for gas is currently about $3.69, according to the AAA Fuel Gauge Report. However, several states currently have average prices topping $4 per gallon.