Washington ? Fear over war with Iraq has sent oil prices higher, but Saudi Arabia and its oil dominance may well determine whether a U.S. attack on Iraq will have worldwide impact on energy markets and choke off a struggling U.S. economic recovery with higher fuel prices.

That’s another reason the Bush administration has been soothing relations with the Saudi Kingdom, including the unusual visit by Saudi Arabia’s ambassador, Prince Bandar bin Sultan, to President Bush’s ranch in Texas this week.

“There’s definitely a war premium. … If it weren’t for this nervousness, (oil) prices would be in the mid-twenties,” said John Lichblau, chairman of the Petroleum Industry Research Foundation.

Instead, the price of benchmark West Texas crude soared past $30 a barrel last week as Bush renewed his verbal attacks on Iraqi President Saddam Hussein.

The price receded somewhat and stood at just under $29 a barrel Wednesday, still up about 60 percent since the beginning of the year. But traders still fretted not only about Mideast war prospects, but about what OPEC producers will do in September when they map out future production levels.

Despite the run-up in oil price, the increase has yet to be felt by consumers. Gasoline prices, despite strong demand, have increased only slightly, averaging $1.40 a gallon this week, 8.5 cents cheaper than a year ago, said the Energy Department’s Energy Information Administration.

“Gas prices have been surprisingly flat,” says EIA analyst Doug MacIntyre. He also said heating oil inventories are adequate, but that could change as demand rises and supplies tighten.

The Organization of Petroleum Exporting Countries had been expected to boost production at its meeting next month, but recent statements by some of the oil ministers now indicate they may not, despite predictions of increased demand later this year. The war talk about Iraq also could influence them, some analysts suggested.

It is not Iraq’s oil that worries the markets.

Despite its huge reserves, Iraq’s production has plummeted because of U.N. sanctions and internal oil infrastructure problems.