[Pearls Before Swine]

During the 2008-9 recession, worldwidle oil demand dropped about 3 to 4 million barrels per day on a base of roughly 84 million BPD. The price before the crash had peaked at $140 or so, and dropped in half.

Taking Iraq off-line — not counting any makeup by Saudi Arabia — would be a supply shock of approximately the same magnitude—so oil could go up quite a lot—maybe 50%, or to about $150.

On the other hand, an oil price surge of this magnitude would almost certainly curtail demand and might trigger an obvious recession. So, I’d guess that after a brief spike, the price would settle at higher than today’s level, but not that high. My guess—$130.

[zeugma]

Your problem is you are trying to think about this rationally. The oil markets are not governed by reason, and haven't been for decades. Iraq represents a tiny sliver of world-wide production. It is nothing compared to the kind of increases that have been occuring in just the United States in the past few years. If oil were rationally priced, we'd be at $1.50/gal gasoline right now given the glut on the market.

I don't see any place selling for $1.50/gallon around here.Any bump you see from current pricing is merely speculators cashing in on ignorance.