Katerina Swanson
Fuel prices have been surging in the past year, with gasoline prices in the United States more than doubling from their levels in early 2020. The Russia-Ukraine war has exerted pressure on the global supply chain, causing a notable escalation in fuel prices worldwide. In the US, the price of regular motor gasoline rose by 49% from January to June 2022, with diesel fuel prices rising even higher at 55%. Gasoline prices vary across the US, with Hawaii and California being the most expensive states due to high gasoline taxes.
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What You'll Learn
Gasoline prices rose 49% from January to June 2022
The economic recession and COVID-19-related restrictions in early 2020 led to a decline in fuel prices. However, as states lifted restrictions and demand increased, fuel prices began to surge. This trend continued until June 2022, when fuel prices finally experienced a slight decline. Despite this, prices remained more than double their early 2020 levels.
The increase in fuel prices has had a significant impact on consumers, with the cost of gasoline reaching unprecedented highs. In the week of June 16, 2022, gasoline prices peaked at $4.99 per gallon nationwide, with Californians paying a record $6.43 per gallon. To provide relief to consumers, some states implemented gas-tax holidays, temporarily suspending taxes on motor fuel.
The surge in fuel prices in 2022 was not an isolated incident. Historically, gasoline price spikes have occurred due to various factors, such as the Organization of the Petroleum Exporting Countries (OPEC) Oil Embargo in 1974 and the Iran-Iraq War in 1980. More recently, high global demand and costly extraction methods contributed to oil price peaks in 2012.
As of 2025, gasoline prices have decreased compared to their highs in 2022. However, fuel prices remain a dynamic and crucial aspect of the global economy, influencing transportation costs and affecting industries and consumers alike. The future of fuel prices is uncertain, but the record-breaking increases in 2022 highlight the volatility and significance of this essential commodity.
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Diesel fuel prices rose 55% in the same period
Fuel prices have been steadily rising since 2020, when they declined due to the economic recession and the COVID-19 pandemic. In 2022, fuel prices reached their highest point since 2014. While fuel prices declined from June to July 2022, they remained more than twice as high as their level in early 2020.
The Bureau of Transportation Statistics (BTS) reported that from January to June 2022, the price of regular motor gasoline rose by 49%. However, the price of diesel fuel rose even higher, increasing by 55% during the same period. This was the largest month-over-month gain on record.
Diesel fuel prices are largely determined by the cost of crude oil, which regularly accounts for around 50% of end consumer prices. When crude oil prices rise, diesel prices tend to increase as well. Additionally, supply restrictions or weak demand outlooks can also influence diesel prices at the pump.
In response to the rising fuel prices, some states have implemented gas-tax holidays to provide relief to consumers. As of August 2022, 29 states had proposed legislation to change their state gas or diesel tax or provide gas tax rebates. Six of these states, including California, Connecticut, and Florida, signed legislation to temporarily suspend their state diesel or gas tax.
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Gas prices are twice as high as in early 2020
Gas prices are indeed twice as high as they were in early 2020. Fuel prices declined from June to July 2022 but remain more than twice as high as their level in early 2020. From January to June 2022, the price of regular motor gasoline rose by 49%, and the price of diesel fuel rose slightly more at 55%.
Fuel prices have risen since declining in early 2020 during the economic recession and the period when many states adopted stay-at-home orders in response to COVID-19. The economic recession caused a price crash in 2009 after a peak in 2008, and oil prices peaked in 2012 due to high global demand and costly extraction methods.
Gasoline price spikes were also seen in 1974 and 1980, caused by the Organization of the Petroleum Exporting Countries (OPEC) Oil Embargo and Iran-Iraq War, respectively. Oil prices dropped in 2020 due to decreased demand during the COVID-19 pandemic but rebounded in 2021. In 2022, prices reached their highest point since 2014.
The Bureau of Transportation Statistics (BTS) has released data showing record-breaking increases in motor fuel prices in 2022. The February to March 2022 price increase for both regular motor gasoline and diesel fuel was the largest month-over-month gain on record. Some states are turning to gas-tax holidays to provide relief to consumers. Each state sets its own tax rate on motor fuel, and the proposed or passed legislation suspends the tax for a set period.
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The US has some of the lowest fuel prices among high-income countries
Fuel prices have been increasing in the US, with prices at record highs. However, the US still maintains some of the lowest fuel prices among high-income countries. This is due to a variety of factors, including the country's position as the world's largest crude oil producer, which allows it to keep retail prices comparatively low.
One of the main reasons for the low fuel prices in the US compared to other high-income countries is the relatively low level of taxation on fuel. The federal tax on motor gasoline is 18.4 cents per gallon, which includes an excise tax of 18.3 cents per gallon and a Leaking Underground Storage Tank fee of 0.1 cents per gallon. While state and local taxes can add to this, the average American tax on fuel is still significantly lower than in most other large economies. For example, the United Kingdom charges 52.9 pence per liter, or approximately $2.45 per gallon, and then adds another 20% tax on top of that.
In addition to taxation, other factors also contribute to the relatively low fuel prices in the US. One factor may be the high demand for gasoline in the country, which could mean that companies do not need to charge as high of a price to make a similar profit. The US government's focus on building freeways and lowering gas prices to accommodate Americans' reliance on cars may also play a role.
The low fuel prices in the US have been a priority for the public for decades. However, this has led to a dilemma, as the relatively cheap gas Americans rely on comes with heavy and challenging costs for the public. For example, the US faces challenges in encouraging the use of public transportation, which can reduce traffic congestion, pollution, and greenhouse gas emissions.
While the US has some of the lowest fuel prices among high-income countries, there are ongoing discussions and proposals to address the negative effects of inexpensive fuel. Suggestions include implementing a mileage fee, a fluctuating gasoline tax tied to oil prices, or a windfall tax on oil companies' record profits.
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Gas prices in California are higher due to steep taxes
Fuel prices have soared in 2022, with the price of regular motor gasoline rising by 49% from January to June, and diesel fuel prices increasing by 55% in the same period. Fuel prices have been on an upward trajectory since the economic recession in 2020, when many countries implemented stay-at-home orders in response to the COVID-19 pandemic. While prices dipped in June and July 2022, they remain more than double the level they were in early 2020.
In California, retail prices for regular-grade gasoline are consistently higher than in any other state in the US, often exceeding the national average by over a dollar per gallon. This can be attributed to various factors, including steep taxes and fees, environmental requirements, special fuel requirements, and isolated petroleum markets.
California drivers pay the highest taxes at the pump, amounting to $0.90 per gallon in local, state, and federal taxes as of March 2025. Federal taxes account for $0.18 of this amount, while the remaining $0.72 comprises state excise tax ($0.60), state sales tax ($0.10), and an underground storage tank fee ($0.02). Additionally, environmental compliance costs further increase the price of gasoline in California. The state's Cap-and-Trade Program and Low Carbon Fuel Standard reflect the costs associated with fuel supplier emissions and carbon intensity, adding up to $0.54 per gallon as of March 2025.
California also mandates a unique blend of gasoline designed to reduce pollution and enhance air quality. This blend is more expensive to produce due to its complex processing requirements and costly blending components. The state's reliance on in-state refineries for its gasoline supply further contributes to higher prices. West Coast refineries, including those in California, have historically maintained lower inventory levels compared to the national average, and the impending closure of additional refineries will likely exacerbate this issue. These supply chain constraints make California's gasoline prices more volatile and susceptible to significant spikes, particularly if any of the limited refineries experience maintenance issues or unexpected outages.
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Frequently asked questions
Fuel prices have risen sharply in the last year, with the price of regular motor gasoline increasing by 49% and diesel fuel by 55% from January to June 2022 compared to their low levels in early 2020 during the economic recession and COVID-19-related lockdowns.
The Russia-Ukraine war exerted increased pressure on the global supply chain, contributing to the surge in global inflation rates and impacting global GDP growth.
Fuel prices in 2022 reached their highest point since 2014 and saw record-breaking increases, with the February to March 2022 price increase being the largest month-over-month gain on record.
Gasoline prices vary across the US, with Hawaii and California being the most expensive states due to high gasoline taxes, which are reinvested in road infrastructure development.
Some states are turning to gas-tax holidays to provide relief to consumers by suspending taxes on motor fuel for a set period.
