Iraqi refugees from Mosul arrive at Khazir refugee camp outside Irbil, 217 miles north of Baghdad, Iraq, Wednesday June 11, 2014. The Islamic State of Iraq and the Levant, the al-Qaeda breakaway group, on Monday and Tuesday took over much of Mosul in Iraq and then swept into the city of Tikrit further south.

Oil Prices Spike as Iraqi Cities Fall

Armed takeovers of Mosul, Tikrit and Kirkuk may cause gasoline prices to spike here at home.

Iraqi refugees from Mosul arrive at Khazir refugee camp outside Irbil, 217 miles north of Baghdad, Iraq, Wednesday June 11, 2014. The Islamic State of Iraq and the Levant, the al-Qaeda breakaway group, on Monday and Tuesday took over much of Mosul in Iraq and then swept into the city of Tikrit further south.

Iraqi refugees from Mosul arrive Wednesday at Khazir refugee camp outside Irbil, 217 miles north of Baghdad, Iraq.

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The alarming fall of Mosul, Tikrit and Kirkuk in Iraq earlier this week may already be causing financial ripples worldwide.

Global oil prices hit a three-month high of $112 a barrel Thursday, just days day after Iraqi soldiers ceded the three cities to militants with nary a fight. Extremists aligned with the Islamic State of Iraq and Syria took Mosul and Tikrit, and Kurdish militants wrested control of the oil city of Kirkuk.

Already, prices tend to rise during the summer driving season; yet this week’s spike have also been driven by fears that the armed takeovers in Mosul and Kirkuk could ultimately affect oil production and exports, experts say.

Oil prices have sharply risen in the wake of armed takeovers of Mosul and Kirkuk by militant groups in Iraq
Oil prices have sharply risen in the wake of armed takeovers of Mosul and Kirkuk by militant groups in Iraq

“There’s no doubt that the turmoil in Iraq is adding [to] prices … because of the uncertainty of future Iraqi exports and the impact that this turmoil might have,” says Gary N. Ross, CEO of PIRA Energy Group, a consulting firm.

Here in the U.S., that means bad news for prices at the pump.

“Anything that impacts crude oil price is going to impact gasoline prices,” Ross says. “We’re still very much importing  foreign oil into the U.S. market, and therefore our prices are pretty much set.”  

[READ: Iraqi Army Collapses Against Al-Qaeda Spinoff in Mosul]

Which means that despite the domestic energy boom here at home, the U.S. won’t be insulated from increasing global oil prices.

For every $1 added to a barrel of oil, retail gasoline prices tend to rise by 2.4 cents, says U.S. Energy Information Administration spokesman Jonathan Cogan. When that might be felt, though, isn't entirely clear.

"There's always a lag on when the price of crude passes onto the wholesale market, and then passes onto the retail market," Cogan says.

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What's more, how high and for how long oil and gasoline prices may rise also depends on the length and severity of this latest crisis in Iraq – and, ultimately, whether it hampers Iraqi production.

“It’s too soon to tell to be able to come up with an impact right now,” says Julie Carey, director of Navigant Economics, a consulting firm. “Markets react – there’s an instantaneous nature to it. And the reaction of individuals and their perceptions matter. It’s possible that there is an overreaction to the event [the takeovers of Mosul, Tikrit and Kirkuk] as far as the interpretation of their potential impact.

“It gets a little bit subject to interpretation.”