According to GasBuddy, the U.S. daily gas average surged to a record high of $5.034 per gallon in July — the highest ever since the 2008 financial crisis. A surge in gas prices increases the cost of production and transportation, invariably driving up the prices of goods and services.
The rise in fuel prices is often due to a number of factors, most of which are beyond consumers’ control. Yet, consumers are always at the receiving end when fuel prices surge.
Read on as we examine gasoline prices in the last decade and the factors influencing the price. While we are at it, we’ll also touch on why the Russia-Ukraine conflict is driving up fuel prices and give tips on how to save money on gas.
An Examination of Gas Prices in the Last Decade
The average gas price has fluctuated in the last decade, dropping to rock bottom in 2016 due to the plunge in oil prices and climbing to a new all-time high shortly after the Russian invasion of Ukraine. Currently, gas prices are lower than they were a year ago but still higher than they were throughout the last couple of years.
2012: Average Gas Prices Surged to New Record High
The year 2012 saw a significant increase in gas prices, making the year the costliest year for gas countrywide since 2008. California’s residents had it even worse, as their average price was $4.028 per gallon, while the national average was $3.63 per gallon.
Although California is an isolated market and has to import more expensive oil from overseas, some other unanticipated events also fuelled the nationwide price surge.
For one, crude oil prices increased due to tensions in the Middle East. Then there were also unanticipated refinery production disruptions — explosions in Chevron’s Richmond facility (California’s biggest refinery) disrupted production, and the flooding from Hurricane Sandy knocked out electricity to refineries in the Northeast.
2013: Price Decline From Previous Year’s Record High
In 2013, the national average price for gas dropped to $3.49, with the average price in some states falling below $3 at some point. And there were predictions that the price would continue to fall in the coming years.
The price decline was majorly due to the booming U.S. crude-oil production and the expansion of the capacity of domestic refineries. At the time, the United States was on the track to becoming the top oil producer.
2014-2016: Global Oil Price Collapse
The price of crude oil fell over a period of twenty months, invariably driving down the price of gasoline. The plunge started in June 2014 from $109 per barrel to $28 per barrel in February 2016, a 74% decrease in price.
The national gas average started out high in 2014, but it plunged to $2.24 per gallon by the end of the year, the lowest since October 2009. The price decline was due to falling crude prices and the economic slowdowns in Europe and Asia, reducing oil demand. Coupled with the fact that the country also increased domestic oil production to levels last seen in the 1980s.
In 2015, crude oil prices plummeted below $40 per barrel, consequently pushing down the annual average for the year to $2.43 per gallon. The drop in oil prices was because of excess supply and low demand. By December 21st, the daily nationwide average dipped below $2 per gallon for the first time since 2009.
Even though the fall of crude oil ended in February 2016, the average gas price was $2.14 per gallon, the lowest annual average since 2004. This was largely due to the excess supply of crude oil from the previous year. In November, oil-producing countries reached an agreement to limit oil output in their attempt to rebalance the market.
2017-2018: Price Rebound
The annual gas average for 2017 was up 13% at $2.41 per gallon. This was due to higher crude oil prices. Refinery and infrastructure outages on the Gulf Coast resulting from the landfall of Hurricane Harvey also contributed to the price increase, particularly along the East Coast and Gulf Coast.
In 2018, the annual gas average was $2.72 a gallon, up 13% from 2017 and 57% from 2016. Rising crude oil prices and high consumption of gasoline contributed to the price surge. However, a quick price fall beginning in October resulted in the average gasoline prices closing the year lower than they started.
2019-2020: Another Fall and Covid-19 Pandemic
While gasoline grew steadily during the first quarter of 2019, it fell for the remainder of the year, bringing the annual gas average to $2.60 per gallon. The price drop was due to the falling crude oil prices. Still, California’s average rose above $4.00 per gallon, primarily due to a combination of local refinery disruptions and attacks on Saudi Arabian oil installations.
The annual average plunged significantly in 2020 due to the pandemic, which caused broad cutbacks in passenger travel and gasoline demand. The annual gas average was $2.17 a gallon, a 17% decrease from the previous year and the lowest since 2016. The oil price war between Saudi Arabia and Russia also partly contributed to the gas price decline.
Check out a detailed explanation of the oil price war between Saudi Arabia and Russia:
2021-2022: Post-Pandemic and Russia-Ukraine Conflict
Low oil inventories and increased demand for gasoline products as the world slowly emerged from the coronavirus pandemic triggered a surge in oil prices, consequently driving up fuel prices. The annual gas average for 2021 was $3.01 per gallon, the highest average since 2014 and more than a $1.00 increase from the start of the year.
Since the beginning of 2022, gas prices have witnessed tremendous fluctuations, reaching all-time highs of $5.034 in March and selling for more than $6 per gallon in some places. As of December 15, the annual gas average was $4.01 per gallon.
The increased annual gas average from the previous year is due to the Russian-Ukraine conflict coupled with the fact that the world was already dealing with low oil inventories.
A barrel of oil that sold for $76.08 in January soared to $123.70 by March when Russia invaded Ukraine due to stoking fears of disruptions to energy supplies. However, as of December, crude oil prices are back in the $70 range it was when the year started.
State Gas Price Averages By AAA Gas Prices
State gas price averages are updated daily to reflect changes in price by gas grade:
|8||District of Columbia||3.382||3.934||4.333||5.13|
Factors That Influence Gasoline Prices
The price Americans pay for gas is determined by four key factors, of which crude oil accounts for more than half of that price. The remainder of the price at the pump is divided roughly equally between taxes, marketing and distribution expenses, and refining charges.
1. The Cost of Crude Oil
The price of crude oil significantly impacts how much gasoline will cost, as it is the primary raw material needed to produce gasoline. Typically, crude oil accounts for 56% of the price of gasoline in the ten years leading up to 2020.
However, crude oil prices vary and are largely influenced by international supply and demand. Between 2014 and 2016, an excess supply of crude oil and less demand triggered a price fall from around $109 per barrel to $28 per barrel.
Similarly, the price of crude oil witnessed a 68% fall in 2020 between January and March due to reduced demand caused by the lockdowns and the oil price war between Saudi Arabia and Russia.
Also, a couple of geopolitical factors can sway the crude oil market, of which the biggest is still the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia. For instance, the tensions in the Middle East caused a surge in crude oil prices in 2012.
2. Refining Costs and Profits
The crude oil has to be converted to gasoline which vehicle engines were designed for through refining. Refining expenses and earnings made up, on average, 14% of the retail price of gasoline in the ten years from 2010 to 2020.
The type of crude oil also determines how refineries process it. The price of necessary additives, such as ethanol, and seasonal and regional blending regulations intended to minimize pollution affect how much gasoline is produced.
Supply and demand factors different from those that apply to crude oil also affect wholesale gasoline prices. For instance, U.S. gasoline prices often increase due to increased demand during the summer.
3. Distribution and Marketing Costs and Profits
After refining, the finished gasoline product is transported to local terminals through pipelines. Then the gasoline is further processed to satisfy market requirements and state standards.
For instance, California has a strict refining recipe that all gasoline must comply with so as to minimize smog-producing emissions.
The gas stations then distribute the final product to the consumer. Between 2010 and 2020, distribution and marketing expenses made up an average of 14% of the retail price of gasoline in the United States.
Clearly, the gas stations need staff and upkeep, which will also be factored into the cost of the product.
In the ten years leading up to 2020, state and local taxes made up 16% of the retail price of gasoline. As of July 1, 2021, federal taxes and levies were 18.4 cents per gallon of gasoline. Similarly, state taxes on gasoline was 30.63 cents per gallon.
As of January 1, 2022, state gasoline taxes varied from 58.8 cents per gallon in California to 8.95 cents per gallon in Alaska. Since 1993, the federal gasoline tax rate has been constant.
However, due to weak demands, many state gas tax rates have recently been raised to enable road maintenance funding to maintain pace with inflation.
New Jersey’s gasoline tax increased by 9.3 cents per gallon in October 2020, whereas Virginia’s most recent rise was a 5-cent per gallon hike in July 2021. The average gasoline tax in western Europe recently is about $4 per gallon, while it can be much more abroad.
Russia-Ukraine Conflict and Its Impact on Pump Prices in the United States
Russia is the world’s third-largest oil producer, behind Saudi Arabia and the United States. It supplies about 8% of the United States’ petroleum imports — about 100,000 barrels of Russian crude oil daily.
The subsequent ban on all imports of Russian oil and petroleum products in early March following the Russian invasion of Ukraine meant the country had to look for alternatives. However, the market was already dealing with low oil inventories, which consequently caused a surge in pump prices.
Also, the supply and demand of the global oil market are very tight that any threat of disruption to energy supplies would send the market into a tizzy. The Russia-Ukraine conflict created uncertainties about the energy supply, which consequently drove up the price of crude oil.
A barrel of oil that sold for $76.08 in January soared to $123.70 by March following the invasion of Ukraine. An increase in the price of crude oil would invariably drive up the price of gasoline products.
Tips to Save Money On Gas
1. Avoid excessive idling
Unless you’re stuck in traffic, turning off and restarting your engine is more fuel efficient than idling. Although the amount of gas you burn when idling may vary by engine, some vehicles can consume up to half a gallon every hour.
So, it is best to turn off your engine to save gas if you need to idle for more than a minute.
You also want to avoid warming your car for a long every morning. Idling the engine for a minute is enough to circulate the oil evenly throughout the engine. Anything outside that is throwing gas out the window.
2. Ensure your tire is properly inflated
As untrue as this may seem, your tire determines the MPG you get from every refill. Underinflated tires greatly impact your fuel mileage, as you lose about 0.2% of your gas mileage for every pound per square inch your tire deflates.
So besides being unsafe to drive with underinflated tires, you are also losing money, as you’ll have to make more trips to the pump.
3. Don’t waste your money on premium gas.
Except your vehicle manufacturer specifically recommends premium gas for your vehicle, you don’t need to waste your money on it. With premium gas having a price difference of as much as $0.50 per gallon, you’ll save a few bucks every time you refill.
So, unless it is specifically stated that your engine requires premium gas, you should be fine with standard gas.
4. Compare prices using your smartphone.
Gas pricing apps compare local gas prices to show you which stations have the best deals. Several apps are free to use and allow you to search by geographical location, city, or ZIP code, as well as criteria such as fuel type and payment method.
Taking a few minutes to compare local costs could result in tiny monthly savings.
5. Maintain a constant speed while driving
You can improve your vehicle’s MPG by driving at a consistent speed. Sudden flooring of the accelerator and hard brakings can affect your engine’s fuel efficiency.
So, slow and steady acceleration, maintaining a constant speed, and using cruise control are all great ways to get the best MPG from each refill.
Frequently Asked Questions
How much is the federal gas tax?
The federal gas tax is 18.4 cents per gallon of gasoline, while diesel costs 24.4 cents per gallon. The tax pays for infrastructure projects and mass transportation costs.
It also includes a .01 cent per gallon levy for the Leaking Underground Storage Tank (LUST) Trust Fund.
What is the highest gas price in the U.S.?
The highest daily gas average was $5.034 per gallon, recorded in June of this year. It is the highest ever since the previous highest recorded in 2008.
Which year was gas price the highest in the last decade?
The year with the highest annual average ever recorded is 2022, with an annual average of $4.01 per gallon. Gasoline prices started out high at the beginning of the year due to low oil inventories and increased gas consumption as the world slowly emerged from the lockdowns.
The invasion of Ukraine by Russia in March further created uncertainties about the oil supply, driving up oil prices in the global market.
Which year was gas price the lowest in the last decade
The annual gas average of $2.21 per gallon recorded in 2016 was the lowest average recorded in the last decade. Gasoline also retailed for less than $2 in several gas stations across the country.
The excess supply of crude oil from the previous year and the country’s surplus oil production was the reason for the huge price drop.
Gasoline price has been unstable in the last decade. And this is largely due to the fluctuating price of crude oil in the global market.
Since the start of the decade, crude oil prices have been affected by several factors, including tensions in the Middle East, excess supply, the COVID-19 pandemic, the price war between Saudi Arabia and Russia, and the Russia-Ukraine conflict.
Ultimately, crude oil prices only account for about 50% of gas prices. Other factors like taxes, marketing, and distribution expenses, and refining costs also play a major role in the final pump price.