Regan Brown
Gas prices are linked with the overall economy in the US and have been for decades. Prices tend to be lower during the winter months when there are fewer drivers on the road and rise during the spring and summer months. Gas prices have been fluctuating over the years, with one of the most famous and impactful shocks to the oil economy being the energy crisis of the 1970s, when prices shot up from $3 to $12 per barrel. In 2023, the average price of gas in the US was $3.52 per gallon, down from $3.95 in 2022.
| Characteristics | Values |
|---|---|
| Factors influencing gas price | Demand and supply of crude oil, price retail margins, operating costs of service stations, taxes |
| Canadian gasoline prices compared to other countries | Comparable or lower than other industrialized countries |
| Gasoline sales tax in Canada | Subject to GST (Goods and Services Tax) and excise tax, with additional provincial and regional variations |
| Ontario gasoline prices | Similar to the Canadian national average |
| Federal carbon tax | Currently 14.31 cents per litre, with proposed increases of 3.3 cents per litre annually until 2030 |
| Provincial cap-and-trade programs | Ontario's program increased gasoline prices by approximately 4.3 cents per litre before being cancelled in 2018 |
| AAA National Average Price | $3.162 as of 7/3/25 |
| State Gas Price Ranges | From $2.706 to $4.479 |
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What You'll Learn
Factors influencing gas prices
Gasoline prices are influenced by a multitude of factors, with the cost of crude oil being the most significant contributor. The price of crude oil has a direct impact on the cost of gasoline, as it is the raw material used in its production. The price of crude oil is influenced by market forces of supply and demand, with an increase in demand and a decrease in supply leading to higher prices. This dynamic is also true for gasoline prices, which tend to rise during periods of higher demand, such as the summer months.
Geopolitical events can also impact the price of oil and, by extension, gasoline. For example, the Russian invasion of Ukraine in 2022 led to a sharp increase in oil and gas prices globally. Additionally, the market power of groups like OPEC and international oil companies can influence prices, although their influence has diminished over time with the development of alternative supply sources and growing demand from developing countries.
Taxes also play a significant role in determining gasoline prices. Federal, state, and local government taxes are added to the retail price of gasoline, with the federal tax in the U.S. being 18.40 cents per gallon as of 2024. State taxes and fees on gasoline averaged 32.44 cents per gallon in the same year. These taxes can vary across regions, leading to differences in gasoline prices from one location to another.
The cost of doing business for gasoline retailers can also impact the price at the pump. These costs include wages, salaries, benefits, equipment, rent, insurance, and various fees. The location of the fueling station, marketing strategies, and local market conditions can also affect the price that consumers pay for gasoline.
Lastly, the octane level of gasoline influences its price. Gasoline with a higher octane level is less prone to engine knocking and is more expensive. The price difference between regular and premium-grade gasoline has generally increased over time, with premium-grade gasoline costing significantly more.
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How to reduce gas costs
The cost of gas is influenced by several factors, including the price of crude oil, supply and demand, taxes, and retail margins. While some of these factors are beyond individual control, there are ways to reduce gas costs. Here are some strategies to consider:
Reduce Gas Consumption
A straightforward way to reduce gas costs is to simply use less gas. This can be achieved by planning and combining trips, avoiding rush hour periods, and considering alternative transportation options such as carpooling, ride-sharing, biking, or public transit. Working from home, if possible, can also significantly reduce your gas bill.
Improve Energy Efficiency
Using your heating and appliances more efficiently can help lower gas costs. Small changes, such as turning down your thermostat by 1°C in winter, can lead to significant savings over time. The Energy Saving Trust estimates that turning down your thermostat by 1°C can save you around £80 a year. Additionally, consider fixing an energy deal to lock in long-term savings, especially if you're currently on a variable tariff.
Switch Energy Suppliers or Tariffs
Comparing prices and shopping around for the best deals can help reduce gas costs. Consider switching energy suppliers or tariffs, especially if you're paying variable rates. There are often fixed-rate deals available that offer lower rates than variable tariffs. Utilize price comparison tools to find the most suitable option for your needs.
Explore Government Support and Payment Plans
If you're struggling to afford your gas bills, reach out to your energy supplier. Many suppliers offer support in the form of hardship grants, repayment holidays, or affordable payment plans. You can also explore government initiatives, such as the Fuel Direct Scheme, which allows for the repayment of energy debts directly from your benefits.
Consider Electric or Hybrid Vehicles
While the initial investment may be higher, switching to an electric or plug-in hybrid vehicle can lead to significant savings on gas costs over time. With the volatile nature of gas prices, investing in a more fuel-efficient vehicle can provide a long-term solution to reducing your gas expenditure.
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Provincial and regional differences in gas prices
Gas prices in Canada vary between provinces and regions. While gasoline prices outside of taxes are similar across Canada, gas taxes differ between provinces and regions. Canadian gas taxes are more than twice as high as those in the US, which is the main reason why gas is cheaper in the United States. On average, Ontario and Quebec account for about 55% of the gasoline consumed in Canada, while the western provinces account for about 36%, and the remaining 9% is consumed in the Atlantic provinces and the Territories.
In Ontario, the average pump price varies between cities. For example, in 2023, the federal government proposed to increase the carbon tax on gasoline by about 3.3 cents per litre each year to 37.43 cents per litre in 2030. The carbon tax is reflected in the retail price but is not part of the wholesale price of gasoline. The wholesale price of gasoline in Ontario is influenced by North American wholesale markets at certain locations, such as the New York Harbour for Toronto prices and Edmonton for Thunder Bay prices.
In Canada, all gasoline sales are subject to the Goods and Services Tax (GST) and the excise tax. However, the situation varies from province to province and region to region. Retailers add a markup to the wholesale price, plus taxes, including the federal carbon tax, to determine the final price. The price of gas is influenced by the price of crude oil and changes in supply and demand. World events such as refinery incidents, extreme weather, or changes in demand play a role in determining the wholesale price.
Additionally, price retail margins, which represent the difference between the pump price and the acquisition cost, including operating costs and service station expenses, also impact the final price. These costs can vary from region to region. For example, retailers may add services such as a car wash or a convenience store to help cover their overheads. Overall, taxes represent the second-highest component of the pump price, after the price of crude oil.
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Gas prices in other countries
The price of gas varies across the world. Several factors influence the price of gas in a country, including supply and demand, oil prices, seasonality, taxes, and regulations.
The United States is among the top 25% of countries with the cheapest gas prices. On 2 July 2025, the average regular gas price in the U.S. was $3.171 per gallon, with prices varying across states. Wyoming had the cheapest gas, while Hawaii had the most expensive.
Some countries with relatively low gas prices include those in the Middle East, a major oil-producing region with a lot of supply and low demand. In contrast, small nations that are not oil producers tend to have higher gas prices due to the costs of importing and refining billions of gallons of oil.
As of May 26, 2025, Hong Kong had one of the highest gas prices at $13.01 per gallon. The global conflict between Russia and Ukraine has also impacted oil and gas prices, with prices surging in 2021 and 2022 due to supply shocks and the invasion.
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$13.99 $14.99
Historical gas prices
The price of gas has fluctuated wildly over the years, and there have been several notable periods of sharp increases. One of the most famous and impactful shocks to the oil economy was the energy crisis of the 1970s, when the average American driver went from paying $0.36 per gallon in 1970 to $1.19 per gallon in 1980. Adjusted for inflation, that would be $2.70 per gallon in today's money, rising to $4.25 per gallon for the 1980 price. The cause of this price rise was OAPEC (the Organization of Arab Petroleum-Exporting Countries) shattering policymakers' assumptions about their reliance on American trade, with prices shooting up from $3 to $12 per barrel.
The effect of the U.S. embargo of oil from Iran can be seen in the early 1980s, with the price of gasoline peaking in 1982. The price of gas also rose substantially from 2002 to 2008, before falling during the 2009 economic recession. This period of price increases was even more chaotic and rapid than the energy crisis of the 1970s, and it was blamed, along with the housing market crash, for the economic collapse of that time.
Oil prices rose to their highest level ever in the U.S. in 2012, but this did not cause the same level of chaos as previous high prices. This was partly due to cars becoming more fuel-efficient, and partly because oil companies found new sources of cheap gas.
Today, we are experiencing some of the highest gas prices in U.S. history, with the average gallon of gas costing $4.90. Inflation has been a major factor in this price rise, and it has impacted not just drivers but also the cost of goods that are delivered by truck.
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Frequently asked questions
The highest average gas price was $3.64 in 2012, which is 167% more than a decade earlier.
The average price of gas first went over $1 a gallon in 1980, with a price of $1.19 per gallon.
The last time the average price of gas was under $2 was in 2004, 15 years ago as of 2019, with an average price of $1.88.
According to a Gas Buddy study, the best day to buy gas is Monday, followed by Sunday.
