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Squawk on the Street

Showdown With Iran Could Send Gas to $4-to-$5 a Gallon

Workers stand in a part of the Bandar Imam Petrochemical Company (BIPC) facility during an official opening ceremony by President Mohammad Khatami, in Mahshahr, Iran, Saturday, June 11, 2005. BIPC is one of the largest industrial establishments in the Islamic Republic of Iran and located on the northwestern coast of the Persian Gulf.(AP Photo/Hasan Sarbakhshian)
Hasan Sarbakhshian

Brian Hicks, president of Wealth Daily, told CNBC’s “Morning Call” that a confrontation with Iran would boost the price of gasoline to $4-to-$5 a gallon at the pump “in a heartbeat.”

But he thinks such a confrontation is unlikely and Iran’s recent seizure of 15 British sailors will be resolved through negotiation.

“Iran knows it sits in the catbird seat,” Hicks said Monday. “I don’t know that they’ll use oil as a weapon directly, but they do know they have a lot of leverage. They know they can push the West to a certain point and they also know the West will be willing to go only so far.”

He said the political situation in Iran and the Middle East won’t calm down any time soon, but Iran understands that it must sell its oil at a reasonable price to maintain stability at home.

Stephen Bailey, senior vice president at Frontier Strategy Group, said Iran lacks refining capacity and imports about 40% of its gasoline. This creates internal pressure to keep supplies plentiful and prices low.

Iran's Oil Card

Bailey said he believed Ayatollah Ali Khamene “will probably counsel against further provocative actions such as holding oil off the market.”

A barrel of oil on the New York Mercantile Exchange recently traded at $62.91, up 63 cents. The price peaked last July at $78.40 a barrel.