Today's gas prices are uncomfortably high for most Americans. The national average cost for a regular gallon of gas was $4.252 as of March 21, 2022, according to AAA. A year earlier, that same gallon would have cost less than $3. The one bit of good news: Such high prices don't last forever.
Gas prices regularly fluctuate. The nation's all-time high price came March 11, 2022, when gas hit a national average of $4.331 per gallon. Yet that price is dwarfed by the $4.11 seen at the pump in July 2008, which equals $5.30 in today's dollars, according to the U.S. Energy Administration. This was just before the onset of the global financial crisis sent gas prices plunging.
As recently as 1998, gas was just $1.06 per gallon, which equates to $1.86 when adjusted for inflation — the lowest price since 1929. During the 1970s, when there were a number of gas shortages, the highest average price for gas was $0.86 per gallon in 1979, or $3.53 when adjusted for inflation.
There are many factors that contribute to the price of gas. "The cost of oil accounts for 55 percent of what you pay at the pump," says Andrew Gross, AAA national spokesperson. "Another 14 percent comes from refining costs, 16 percent is marketing and distribution, and the last 15 percent is taxes."
The price of crude oil, the main driver in gas costs, depends upon many factors, but the main one is simple: supply and demand. When there's a lot of oil out there, prices drop. When there's not enough oil to meet demand, prices rise. The world's oil supply is controlled by oil-producing nations, including the U.S., but also by OPEC, a cartel of 13 oil-producing nations clustered in Africa, the Middle East and South America.
The recent surge in gas prices is partly due to Russia's late-February invasion of Ukraine, which has spooked the global oil market. But prices were already climbing before the invasion, due to the COVID-19 pandemic. Back in 2020, when COVID first emerged, the pandemic caused an enormous drop in demand, as people stopped traveling. This left oil producers with a large surplus, so they cut back production.
More recently, with COVID vaccinations and boosters readily available in the U.S. and many other countries, demand for gas is rising, as homebound citizens are eager to resume travel. Yet oil producers are leery about quickly ratcheting up production to meet this demand. The pandemic is still here, for one thing, plus there are major uncertainties about the situation in Ukraine. Producers do not want to get stuck with another surplus on hand.
How U.S. Gas Prices Compare With the Rest of the World
While the cost of gas is rising across the U.S., comparing prices between the states is jarring. California's prices are the highest in the nation, averaging $5.850 per gallon statewide as of March 21, 2022. That same day, Kansas posted the lowest statewide average: $3.767. Part of these price differentials come from state gas taxes, which in 2022 ranged from 8 cents per gallon in Alaska to 51.1 cents in California, where environmental requirements for its fuel blends help drive up the cost.
A state's location within the U.S. also plays a huge role in determining fuel costs. States that are closer to refineries and pipelines, which are clustered in the South, pay less than those states that are farther away, as their gas transportation costs are lower. Western states are especially hard hit, as they are far from the refineries and their oil needs to flow through pipelines crossing the Rocky Mountains, an expensive undertaking.
Lest you feel sorry for yourself at the pump, whether you're living in Kansas or California, consider what's going on in the rest of the world. European countries such as Germany and the Netherlands were charging $9.12 and $9.20 per gallon of gas on March 14, 2022. And in Hong Kong, the world's most expensive place to get gas, the price was a whopping $10.98 per gallon.
Citizens in some of the world's oil-rich countries luck out, though. Iran, Libya and Venezuela were charging their citizens a pittance for gas — between 10 and 19 cents per gallon as of March 14, 2022.
The reasons for the world's wild gas price differentials are similar to those facing the U.S. Prices differ depending on how far the oil is traveling, the strength of a country's trade structures and more. In addition, many industrialized nations tax their gas at a much higher rate than the U.S., where the federal gas tax has been 0.184 cents per gallon since 1993. European Union countries, in contrast, must levy a minimum gas tax of 0.36 euros per liter, or $1.55 per gallon, and many countries add to that. The highest gas tax in the European Union is in the Netherlands, at 0.81 euros per liter ($3.51 per gallon).
Today, the main question on everyone's mind is how long this upward trend will last. No one knows for certain, of course.
"We haven't had a major European land war in 75 years, much less in the middle of a pandemic," says Gross. "OPEC and others are still producing oil at less than pre-pandemic levels. There are a lot of questions out there."
Most experts warn gas prices will likely continue to rise, as we're nearing the summer season, when gas is reformulated to ward against the excess evaporation that can occur when temperatures warm — a pricy process. Yet they say sky-high prices won't last forever. For if they climb too excessively, the economy will falter, and demand will plunge along with the price.
"Gas prices go up, and then go back down," Gross says. "But nobody ever says, 'Remember when gas was $1.99?' People only remember the bad times."
Saving Money at the Pump
The best way to save gas is to limit your usage. But walking or biking to work or the store isn't always possible. Here are seven things everyone can do to use less fuel.
- Obey speed limits. Driving faster uses more gas. Going 75 miles (120 kilometers) per hour on the highway instead of 65 mph (104 kph) can cost you six to seven more miles per gallon, according to Consumer Reports. On a 15-gallon (57-liter) tank, that means losing 100 miles (161 kilometers) of driving.
- Drive smoothly. Putting the pedal to the metal eats up gas, as do hard braking and sharp turns.
- Ditch exterior hardware. Aerodynamics matter, so remove clunky add-ons, like roof racks, roof boxes and tail-hitch racks.
- Keep your tires inflated. Tires lose pressure over time. And when they're below recommended levels, the car sucks more gas. "Improperly inflated tires will decrease your car's efficiency by 14 or 15 percent," Gross says.
- Empty out the trunk. The more weight in the car, the more fuel consumed. Remove any unnecessary items from your trunk and back seats, like camping gear or that box of books you've never gotten around to dropping off at the thrift store.
- Don't idle. It takes less gas to restart your car than to have it idle for more than a minute or two. So turn your car off at long stoplights, avoid driving during rush hour, and see if you can work from home once or twice a week.
- Combine trips. Wait to run all of your errands at once. This not only cuts down on the number of miles driven, but reduces fuel consumption, as warm engines are more efficient than cold ones.