Gas prices have fluctuated wildly over the past several decades. As of November 2022, gas prices reached over $5 per gallon on average nationally, some of the highest prices ever seen. But to understand today’s high gas prices, it’s helpful to look to history and examine when gas prices reached their peak previously.
The 1970s Oil Crisis
One of the first major spikes in gas prices in the United States occurred in the 1970s. In 1973, the members of OPEC (the Organization of the Petroleum Exporting Countries) proclaimed an oil embargo in response to the United States’ involvement in the Yom Kippur War. This embargo led to substantial decreases in oil production and supply, causing gas prices to skyrocket. By 1974, gas prices had climbed from an average of 38.5 cents per gallon in May 1973 to 53.1 cents per gallon in May 1974, an increase of nearly 40%.
But prices continued to surge even higher in 1979 and 1980 due to additional factors like the Iranian Revolution which disrupted global oil supplies further. In April 1979, the national average gas price was 86.7 cents per gallon. Just one year later in April 1980, it had shot up to $1.25 per gallon on average, the highest price that had ever been seen at the time. Adjusted for inflation, that sets the record for the highest gas price in history at around $4.10 per gallon in today’s dollars.
Factors Behind the 1970s Price Surges
The rapid price increases of the 1970s were driven primarily by:
- OPEC oil embargo, which cut supply
- Iranian Revolution, which further disrupted global oil production
- Increased demand in the U.S. and growing consumption
- High inflation during the 1970s
The oil shocks and price spikes of the 1970s made clear the impact that supply and demand imbalances could have on gas prices. It also demonstrated the power that OPEC held in being able to drive up costs by coordinating production cuts among its member nations. The 1970s oil crises were a foundational event that shifted energy policy and pricing for decades to come.
Gas Prices in the 21st Century
After the turbulence of the 1970s, gas prices fell back to more moderate levels during the 1980s and 1990s, averaging around $1 per gallon. But as the new millennium dawned, prices began marching higher once again. A variety of factors converged to drive costs upward including:
- Increasing crude oil prices
- Growing demand from developing economies like China and India
- Limitations in refining capacity
- Instability in oil-producing regions
By the summer of 2008, gas prices averaged a national record of $4.11 per gallon, finally surpassing the highs reached 30 years earlier.
Highest State Gas Prices in 2008
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Prices quickly tumbled as the 2008 recession took hold and demand declined. But as the economy recovered, gas prices began another steady climb. By early 2011, the national average crossed the $3 per gallon mark, then $3.50 in early 2012. High oil prices kept pushing costs higher heading into the summer driving season of 2012.
In April 2012, the nationwide average gas price peaked at $3.94 per gallon, just a few cents shy of the 2008 record. Gas prices would remain elevated above $3.50 per gallon for most of 2012 before starting to moderate late in the year. The high prices of 2008 and 2012 demonstrated the new normal range for gas prices, markedly higher than the previous decades.
The Rise of U.S. Oil Production
In the mid-2000s, advanced drilling techniques like hydraulic fracturing opened up huge new sources of shale oil production in the United States. Once just a bit player in global output, the U.S. rapidly ramped up crude oil production from around 5 million barrels per day in 2008 up to 13 million barrels per day by 2018.
This domestic shale boom helped cushion the impacts of global supply disruptions. While gas prices remained high by historical standards, they were more insulated from the types of price spikes seen in earlier decades. But shale drilling slowed in 2020 and 2021 amid pandemic uncertainty and suppressed demand. As demand came roaring back in 2022, tight supplies collided with rebounding consumption to send gas prices skyward once again.
2022: Russia’s Invasion of Ukraine
By February 2022, national gas prices were already elevated around $3.53 per gallon amid high crude oil costs. But Russia’s invasion of Ukraine upended global energy markets. The US banned imports of Russian oil in March, while many European nations pledged to wean themselves off Russian energy imports.
Removing Russian barrels from the world market caused fears of severe supply shortfalls. Despite the U.S. ramping up production, gas prices surged to over $4 per gallon on average in early March. Momentum continued driving prices higher through March, April and May, bringing the national average to over $5 per gallon by mid-June 2022.
New Record Highs in 2022
Many individual states and cities saw average prices cross $6 per gallon, with peaks as high as $6.44 in California in October 2022. The dizzying spike reversed course in July as fears of recession dampened oil demand. By December, prices had fallen back below $4 per gallon nationally. But the 2022 highs represent an unprecedented run-up that drivers had never experienced before.
Historical Gas Price Chart
This chart summarizes the major gas price spikes over the decades, from the 1970s OPEC oil embargo to the recent highs of 2022. It illustrates how political events, supply and demand shifts, and economic growth all combine to drive volatility in gas prices over time. Periods of low prices inevitably give way to rapid surges which then ease back gradually.
Outlook for Gas Prices
Predicting future gas prices always involves uncertainty. Global conflict, economic expansion or contraction, production levels, policy changes – many external forces can cause gas prices to swing up or down over time. But examining key factors can help frame what to potentially expect:
- As the pandemic recedes, oil demand may stabilize at a new normal level. Further COVID disruptions could suppress demand.
- Oil producers are wary of overinvesting after recent volatility, keeping supplies tighter.
- A potential global recession in 2023 could reduce consumption, pressuring prices downward.
- Russia’s oil exports may decline long-term, supporting higher prices.
- Electric vehicles and renewable energy will gain market share, reducing future gas demand.
Barring an unexpected shock, most experts see gas prices remaining above the lows of past decades but below the peak levels reached in 2022. The EIA predicts national average gas could drop to $3.53 per gallon in 2023. However, any number of events could cause prices to spike higher or lower. Drivers have learned to expect regular price cycles and uncertainty when filling up at the pump.
The highest gas prices ever reached were the summer 2008 records of approximately $4.11 per gallon on average nationally. This surpassed the previous highs from 1980 during the oil crises of the 1970s. The all-time record was finally exceeded in June 2022 after Russia’s invasion of Ukraine disrupted global oil supplies and sent gas prices past $5 per gallon across much of the United States.
While prices have eased from these extremes, they remain elevated by historical standards. Drivers have experienced significant price volatility in recent decades, in contrast to the more stable costs from the 1980s through 1990s. Multiple factors related to supply, demand, global politics and economic trends contribute to the price cycles experienced today. Expect gas prices to remain changeable, but likely within a higher range than past eras. Conserving fuel, opting for more efficient vehicles and moderating discretionary trips can help consumers adapt to the new reality of frequently fluctuating pump prices.