The New Year kicked off with the highest January gas prices in history, due in large part to the tensions between the U.S. and Iran. According to the American Automobile Association (AAA), the average price for a gallon of regular unleaded gasoline in the United States is roughly $3.38, nearly 30 cents higher than a year ago. It's bound to get worse. This week, Bloomberg reported that oil was trading "near $100 in New York on concerns that Iran may respond to a European embargo on its crude exports by following through on threats to disrupt Persian Gulf shipping."

The oil market is largely driven by headlines, and soars every time the West shakes their fist at one of Israel's enemies. That not only drives up the price you pay at the pump for a gallon of gasoline, but also affects the cost of every product and service that travels by way of land, air or sea.

Sure, there are other factors that play into the price of oil—demand, speculation, taxes, environmental regulations, refinery capabilities, etc., etc. But for at least the last twenty years, war (and rumors of war) have been the major driving force.

On February 19, 2008, former (and I might add deceased) Representative John Murtha (D-PA) stated, "Oil was $27 per barrel before the war in Iraq started. Today it's $86 a barrel. Gas at the pump was $1.76 per gallon before the war in Iraq. Today it's $3.02."

Of course the Iraq war—just like the one we're now starting with Iran—would not have been waged had it not been for Israel, who's had their crosshairs trained on both Muslim nations for many years. In 1996, Israeli dual citizens Douglas Feith and Richard Perle were both advisors to Israel's Likud Party leader Benjamin Netanyahu. During that time, the duo co-authored a policy paper, entitled A Clean Break: A New Strategy for Securing the Realm. In it, they said that Saddam would have to be destroyed, and that Syria, Lebanon, Saudi Arabia, and Iran would all have to be overthrown or destabilized in order for Israel to be truly safe. Feith would later become the U.S. Under Secretary of Defense of Policy for the Bush administration. It was through Feith's Office of Special Plans (OSP) that the Israelis channelled faulty intelligence about Saddam's so-called "Weapons of Mass Destruction." These lies led the U.S. Congress to enact the Iraq War Resolution of 2002, which gave George W. Bush carte blanche to wage a bloody conflict that has since claimed the lives of over one million Iraqis and nearly 5,000 American troops.

Now, new lies about Iran's so-called "nuclear weapons program" are fueling that war, and Syria is also under attack based on lies that Assad is killing his own people. As for Lebanon and Saudi Arabia? It's only a matter of time, baby!

For decades, Israel has largely been responsible for the rise in petroleum prices. Writing for The Washington Report on Middle East Affairs in 2003, Dr. Thomas R. Stauffer concluded that conflicts in the Middle East have cost the American taxpayer approximately $3 trillion. According to Stauffer, "The largest single element in the costs has been the series of six oil-supply crises since the end of World War II."

He goes on to say that, "the several earlier Mideast oil crises, in 1956 and 1967, actually had relatively little effect on the United States," and it wouldn't be until the Arab-Israeli War of 1973 that things would start spiraling out of control. That's when the U.S. forked out almost $1 trillion dollars to supply Israel with arms and provide subsidies to countries willing to sign peace treaties with them, such as Egypt and Jordan. Stauffer writes, "Washington's intervention triggered the Arab oil embargo which cost the U.S. doubly: first, due to the oil shortfall, the US lost about $300 billion to $600 billion in GDP; and, second, the U.S. was saddled with another $450 billion in higher oil import costs."

A third factor added to the oil-related cost of the 1973 war was the U.S. created Strategic Petroleum Reserve (SPR), which was designed to insulate Israel and the U.S. against the wielding of a future Arab "oil weapon." Stauffer writes, "It was destined to contain one billion barrels of oil, which could be released in the event of a supply crisis. To date the SPR, which still exists and is slowly being expanded, has cost $134 billion—since much of the oil was bought at high prices, and because the salvage value is relatively low. Thus, the 1973 oil crisis, all in all, cost the U.S. economy no less than $900 billion, and probably as much as $1,200 billion."

The next regional oil crisis was the Iranian revolution and the subsequent Iran-Iraq war. "The joint effect of the two crises cost the U.S. consumer $335 billion in terms of higher prices for imported oil," writes Stauffer. "It also caused a rise in prices of domestic energy—oil, gas, and coal. These "knock-on" effects are not included, however, so that the figure of $335 billion is indeed a lower bound for the actual costs of those two, back-to-back crises. The total consumer cost is likely to have been more than double that figure."

Stauffer concludes by referencing the 1990/91 Gulf war, which he said proved to be a bargain in comparison to other regional conflicts, costing "American consumers approximately $80 billion in higher oil prices, including both imported and domestic oil, again excluding the resulting "knock-on" effects."

I guess that brings us up to date. So what does the future have in store for oil prices in the event that the U.S. and Israel continue to push Iran to the brink to ruin? Writing for 24/7 Wall Street, Douglas A. McIntyre reports, "The International Monetary Fund says the nations that would set sanctions against Iran's oil exports will pay for their convictions with crude prices that could rise as much as 30%. Brent crude would be pushed to more than $140 a barrel. The shock of the increase could knock the global economic recovery, such as it is, off of its axis."

And in November 2011, the Pacific Investment Management Company (PIMCO)—the world's largest bond investor—released a report that offers four possible scenarios that might likely occur if Iran's energy sector is compromised:

Scenario 1: Exports minimally affected. Concerns would drive initial price response. The International Energy Agency (IEA) would likely make statements about willingness to meet any shortfall in supplies. Oil could spike initially to $130 to $140 per barrel and then settle in a higher range, around $120 to $125, in relatively short order as a premium (mostly a risk premium) becomes embedding into the market, at least for a while. The timing of the spike would depend on how much the market is taken by surprise and whether or not the strike is priced in ahead of time.

Scenario 2: Iranian exports cut off for one month. IEA would likely swing into action and Saudi Arabia could begin to offer more oil into market. In this case, we would expect prices could reach previous all-time highs of $145/bbl or even higher depending on issues with shipping. The IEA and Saudi Arabia can meet market needs, but the increase in uncertainty and the loss of spare capacity would affect pricing. In this case, after a few months, we would expect prices could fall back to $130 to $135/bbl range.

Scenario 3: Iranian exports are lost for half a year. This is where the potential outcomes get quite dicey. We think oil prices could probably rally and average $150 for the six months, with notable spikes above that level. The IEA would likely release oil steadily, but consumption will need to take a hit from prices and slower economic activity. Once Iranian crude oil returns to the market and the environment stabilizes, oil would likely return to around $110/bbl or even lower depending on global strength at the time.

Scenario 4: Greater loss of production from around the region, either through subsequent Iranian response or due to lack of ability to move oil through Straits of Hormuz. This is the Armageddon scenario in which oil prices could soar, significantly constraining global growth. Forecasting prices in the prior scenarios is dangerous enough. So, we won't even begin to forecast a cap or target price in this final Doomsday scenario.

No matter how you look at it, the U.S. consumer is destined for hard times if this dangerous game is allowed to continue.

As for Israel—they'll do just fine no matter what. While Americans painfully adjust to price increases brought on by $5 to $10 per gallon gasoline, the Israelis will find a negligible decrease in their standard of living. Thanks to a 1975 Memorandum of Understanding (MOU), the United States government is obligated to satisfy all of Israel's oil needs in the event of crisis, even if it causes domestic shortages to the American people. This little known legislation is renewed every five years, and commits $3 billion taxpayer dollars to maintain a strategic U.S. reserve for Israel. The U.S. government also guarantees delivery of oil in U.S. tankers if commercial shippers become unable or unwilling to carry oil from the USA to Israel.

Yeah, I know…Doesn't that just SUCK!!!!!