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Why the Syrian crisis will mean higher gas prices

Wednesday, 28 Aug 2013 | 10:35 AM ET
Anjcl | Flickr | Getty Images

Now that the U.S. and its allies are convinced that Syria used chemical weapons on its own people, military action against Syria seems to be a foregone conclusion.

In my view, it's not a matter of "if," it's a matter of "when." U.S. officials told NBC News that military action could come as early as Thursday, and we have already seen crude rise 5 percent in anticipation of a strike.

When a strike happens, how high could we see crude trade? History tells us that once military action begins, if it looks like the action is contained to the targeted country, then oil will sell off. But it all depends on what the response to the strike is.

If we see Syria's allies in the region get involved—namely Iran and Russia—we could see crude rise as high as $115 or $120 rapidly. If the conflict turns out to be a prolonged situation, then we could see $125.

(Read more: Syria recalls Rumsfeld's law of 'unknown unknowns')

The fallout from higher crude prices is higher gasoline prices. After the Labor Day holiday, we usually see gas prices start to come off at the pump. The reason for this is simple—that is when summer driving season comes to an end, and when it does, demand falls. But this year, different factors are coming to the fore.

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Gasoline is already trading 22 cents higher than it was last year at this time. And much of the rise in gas this year is because of the increased tensions in Syria, in Egypt and in Libya—where crude oil production is now about 200,000 barrels a day, versus normal production of 1.4 million.

Once again, the force and duration of the move will all depend on the ramifications of any military action. Either way, with the increase in gas prices over the last week, consumers are certain to see higher prices at the pump. And that will be another headwind in an economy that seems to be full of them this fall.

(Read more: Brent may hit $150 if Syria impacts Iraq, SocGen warns)

If you are long crude, my advice is to stay long and keep moving those stops. I do believe that the likelihood of us going yet higher is very real. Specifically, I would look to buy crude at $109.50, but I am keeping a tight stop. After all, if the market turns, we could lose $2 or $3 very quickly.

Let's hope we don't see any prolonged conflict—but if you are a trader, you must be prepared for everything.

Anthony Grisanti is the founder and president of GRZ Energy. Follow him on Twitter: @AnthonyGriz.

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