Rajan Wilcox
Gas prices are a highly discussed topic, especially in the political sphere. In 2025, the national average price of gas in the US was $3.18-$3.21 per gallon, with prices expected to fall below $3 a gallon by September, according to Patrick De Haan of GasBuddy. De Haan attributes this to the resolution of the Israel-Iran conflict, which caused a spike in oil prices, and expects a slow decline in prices over the summer. This prediction is supported by historical trends, as gas prices typically drop during the summer due to factors increasing the supply of gas. Adjusted for inflation, gas prices are among the lowest in 20 years.
| Characteristics | Values |
|---|---|
| Average price of gas one year ago | $3.51 per gallon |
| Gas price in 1970 | $0.36 per gallon ($2.70 in today's dollars) |
| Gas price in 1980 | $1.19 per gallon ($4.25 in today's dollars) |
| Cheapest states for gas | Mississippi and Texas |
| Most expensive states for gas | California and Hawaii |
| Factors influencing price variation | Local taxes, refinery access, supply disruptions |
| Strategies to save on gas | Use gas apps, loyalty programs, rewards programs, cash-back credit cards |
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What You'll Learn
Gas prices vary across the US
Gas prices vary widely across the US, with several factors influencing the discrepancies. Regional differences in gasoline prices are influenced by variations in state and local taxes, distance from supply sources, supply disruptions, retail competition, and operating costs.
West Coast states like California typically experience the highest prices due to higher taxes, limited refineries producing California's unique blend of gasoline, and stringent environmental regulations. California's refineries need to operate at near-full capacity to meet the state's demand, further impacting prices. In contrast, states in the South and Midwest generally enjoy lower gas prices. For instance, Mississippi and Texas offer cheaper fill-ups.
Local supply and demand conditions also play a role in price variations. For example, higher gasoline prices in August and September of 2023 resulted from increased demand at the end of the summer driving season, coupled with lower refinery production and low inventories.
Additionally, transportation costs contribute to regional price discrepancies, with retail gasoline prices tending to be higher in locations farther away from supply sources. Events that disrupt gasoline production or distribution, such as pipeline issues or refinery maintenance, can also lead to increased prices in certain regions.
Gas prices in the US have been on a downward trend since 2022, with the US retail price for regular-grade gasoline averaging $3.52 per gallon in 2023, a significant decrease from the previous year's high of $5.01 per gallon in June 2022.
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Gas prices are linked to the economy
Gas prices are inextricably linked to the economy. This relationship has been observed for decades, with oil gluts and crises correlating consistently with economic prosperity and downturns. A notable example is the energy crisis of the 1970s, when OAPEC's actions led to a sharp increase in oil prices, causing the average American driver's gas costs to surge. This period also witnessed a massive global recession in the late '70s and early '80s.
The impact of high gas prices extends beyond the pump, affecting the wallets of truck drivers and, ultimately, the prices of goods that rely on transportation. The lead-up to the 2009 recession serves as another illustration of this connection, with gas prices spiking before the economic downturn. The most recent data shows that gas prices have been falling annually since 2022 due to slowing demand, which has provided some relief to consumers.
Regional variations exist in gas prices across the U.S., with West Coast states like California typically experiencing higher prices compared to the South and Midwest. Local taxes, refinery access, and supply disruptions all contribute to these discrepancies. Despite these differences, gas prices have a countrywide impact on the economy. The price of gas influences not just transportation costs but also the prices of essential goods, making it a significant factor in the overall economic health of the nation.
The intricate connection between gas prices and the economy is undeniable, and understanding this relationship is crucial for comprehending historical economic trends and predicting future ones. The fluctuations in gas prices can be viewed as a barometer of economic health, with periods of high gas prices often preceding or coinciding with economic recessions. This knowledge can help policymakers and economists make informed decisions to mitigate the impact of economic downturns on businesses and consumers.
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Gas prices impact the cost of goods
The cost of gasoline is influenced by numerous factors, which in turn impact the price of goods. The price of crude oil is the most significant factor in determining gasoline prices, as it is the raw material used in its production. From 2014 to 2023, the price of crude oil accounted for 52.3% of the price of gasoline, with an average price of $2.83 per gallon. However, this percentage can vary, as seen in 2020 when crude oil prices constituted only 43% of gasoline costs due to the COVID-19 pandemic. Geopolitical events, such as the 2022 Russian invasion of Ukraine, can also impact oil and gas prices.
The refining process and its associated costs also influence gasoline prices. Refining costs can vary seasonally and regionally due to different pollution-reducing requirements and the availability of processing technology. From 2014 to 2023, refining costs and profits accounted for 15.3% of the retail price of gasoline. The octane level of gasoline, which indicates its resistance to combustion, is another factor that affects pricing. Premium-grade gasoline, with its higher octane level, is the most expensive option.
Distribution, marketing, and retail dealer costs are additional components of gasoline prices. These costs can vary depending on the location of the gasoline fueling station, including factors such as wages, rent, and local fees. The price of gasoline is also influenced by federal, state, and local government taxes. The federal tax on motor gasoline in the United States is 18.4 cents per gallon, which includes an excise tax and a fee for the Leaking Underground Storage Tank fund.
The impact of gasoline prices on the cost of goods is significant. For example, during periods of economic growth, the industrial sector's increased demand for natural gas as a fuel and feedstock for producing goods can lead to higher natural gas consumption and prices. Similarly, severe weather conditions, such as hurricanes, can disrupt natural gas production and cause price increases. The strength of the economy and the resulting demand for goods and services can further influence natural gas markets.
In summary, gasoline prices are influenced by various factors, including crude oil prices, refining costs, octane levels, distribution and marketing expenses, government taxes, and local market conditions. These factors collectively contribute to the overall price of gasoline, which then has a direct impact on the cost of goods, particularly in the industrial sector, where natural gas is widely used as a fuel and feedstock.
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Gas prices fluctuate
Several factors influence the supply and demand for gasoline, leading to price fluctuations. Firstly, seasonal changes in demand and gasoline specifications play a role. For example, gasoline prices tend to rise in the spring and peak in late summer when people drive more frequently. Environmental regulations also require that gasoline sold in the summer be less prone to evaporation during warm weather, leading to the use of more expensive components. Secondly, crude oil supply and refining, gasoline imports, and gasoline inventories (stocks) impact the supply of gasoline. Stocks act as a buffer between major short-term supply and demand imbalances, and stock levels can significantly affect gasoline prices. Thirdly, major global events, financial markets, and seasonal consumer trends can also contribute to fluctuations in gas prices. For instance, during the COVID-19 pandemic, a sharp decrease in demand due to travel restrictions caused fuel prices to plummet.
While supply and demand are the key determinants of gas price fluctuations, other external factors can also play a role. These include the weather and tourism, which can cause gas stations to adjust their prices quickly. Additionally, decisions made by organizations like OPEC (Organization of the Petroleum Exporting Countries) can impact gas prices, particularly in regions that rely on foreign oil.
It is worth noting that the ease of changing price signs at gas stations, whether manually or through digital displays, is not considered a significant factor in price fluctuations. Gas prices have always been susceptible to frequent adjustments, and the ability to change signs easily does not fully explain the price swings observed in the gasoline market.
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Gas apps help find the cheapest gas
With gas prices remaining higher than last year, finding cheap gas is a priority for many consumers. Luckily, there are several apps that can help you find the cheapest gas near you, saving you time and money. Gas apps are the easiest way to find cheap gas, and they require little commitment compared to loyalty programs that limit you to a single fuel brand.
One of the most well-known apps is GasBuddy, which has helped drivers save more on fuel for over 25 years. The app allows users to search for gas prices by their current location, ZIP code, or city. It offers a free rewards card that gives you discounts of up to 25 cents per gallon and links directly to your checking account to pay for gas. GasBuddy also offers a trip cost calculator that will estimate the cost of gas for your next road trip, allowing you to budget more accurately. In addition to finding cheap gas, GasBuddy also offers exclusive deals and rewards, as well as fun challenges for the chance to win free gas.
Another option for finding cheap gas is the Waze app, which is primarily known as a navigation app. Waze allows users to sort gas options by price, distance, or brand, making it easy to find the most affordable option. The app is available for iOS and Android devices and can be used anywhere in the world with cellular and GPS reception, making it a convenient choice for travelers.
While deciding which gas app to use, it's important to consider characteristics such as cost, membership benefits, and how the app makes money. For example, GasBuddy shares location information with advertisers, so users should be sure to opt out of sharing their location in their privacy settings if they prefer. Overall, gas apps are a helpful tool for finding the cheapest gas and maximizing your savings at the pump.
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Frequently asked questions
Gas was 36 cents a gallon in 1970, which is equivalent to $2.70 per gallon today.
The energy crisis of the 1970s caused prices to shoot up from $3 to $12 per barrel. As a result, the average price per gallon at the pump increased from $0.36 in 1970 to $1.19 in 1980.
Local taxes, refinery access, and supply disruptions can all cause fluctuations in gas prices.
West Coast states like California and Hawaii typically have the highest gas prices.
Gas apps like GasBuddy, Waze, and Google Maps can help you find cheap gas in your area by showing real-time price updates.
