Gas Prices Are Nearing Record Highs – Here's The Last Time They ...

Gas prices are surging toward $4 a gallon, as oil has topped $100 a barrel for the first time since 2014.

Prices have doubled in less than two years. The average gallon of regular conventional gasoline was less than $1.70 in April 2020 due to plummeting demand caused by the pandemic.

Regular conventional gasoline cost an average of $3.49 per gallon in the United States for the week ending in Feb. 28, and it’s only grown in the days since. We’re not quite at record levels yet – but we’re getting close.

There’s only been one stretch when average regular conventional gasoline prices exceeded $4 per gallon on average: June and July 2008. Prices peaked at $4.05 during the week of July 14, 2008, per the U.S. Energy Information Administration.

The current $3.49 per gallon is in the 92nd percentile for gas prices in the U.S. since 1991.

Here’s a look at how the prices have fluctuated.

(Can’t see the chart? Click here.)

With prices rising as fast as they are, they are very likely to hit $4 a gallon very soon, said Patrick De Haan, head of petroleum analysis at GasBuddy. But how do gas prices compare from over the years, when adjusted for inflation?

When adjusted for January 2022 dollars, gas prices hit $5.12 in July 2008. Gas prices topped $4.60 per gallon on average in inflation-adjusted dollars in 2011 and 2012.

Per the Consumer Price Index, $100 in January 2022 had the same value as $128 in July 2008.

Here’s a look at the average gas prices since 1991, but adjusted for inflation.

(Can’t see the chart? Click here.)

The last two times gas prices peaked, a steep drop followed. For example, gas was $4 per gallon on the Fourth of July in 2008, but dipped to $1.60 by Christmas.

The initial 2008 surge came on after supply couldn’t keep up with demand, De Haan said.

“Back in 2008, there was a perfect storm of a recovering economy and not enough breathing room in terms of global supply,” De Haan said. “So prices quickly escalated through the summer. Very few Americans slowed down their driving habits and that continued to push oil higher and higher.”

But the collapse of Wall Street in fall 2008 caused a big correction to gas prices, De Haan said – and also spurred an economic recession.

Gas prices were low in 2020 because of the pandemic, De Haan said. People stayed home from work and canceled travel plans, leading to a 20% reduction in gas usage for the year, he said.

Oil producers scaled back production. But now, they can’t keep up with resurging demand.

“They were just caught flat-footed,” De Haan said.

Russia’s invasion of Ukraine has boosted gas prices further, since Russia is the nation’s No. 3 oil producer and provides 25% of Europe’s supply, per the Associated Press. If Russia’s oil stops flowing, that further depletes the world’s supply and sends prices higher, De Haan said.

That’s why De Haan isn’t confident we’ll see a big dip in gas prices like 2008.

“Could we get back to $2? Maybe. But I don’t see it in the cards,” De Haan said. “Not only does supply have to completely catch back up to where it was pre-COVID, but global oil inventories have to build back up to where they were prior to COVID. And that’s a long way off, that’s probably years from now.”

Whose fault is it?

Americans and politicians love to assign blame when it comes to high gas prices.

“Unfortunately, politicians are clueless when it comes to gas prices,” De Haan said. “Even President (Joe) Biden thinks he has some great influence over prices, but he doesn’t. A lot of the people that regurgitate these talking points are just misinformed.”

Oil production was slashed in 2020 during President Donald Trump’s tenure – although that was necessary to “stop the bleeding,” De Haan said.

While Biden doesn’t have much control over the current gas prices, De Haan said his policies could impact them in a few years. Biden has implemented some drilling moratoriums, which prevent companies from finding new places to get oil once the current wells dry up.

“The president is taking us down a road that will eventually lead to higher prices, but that exit will take two to three years for us to get to,” De Haan said.

Pipelines get lots of political attention, De Haan said, like the Keystone Pipeline. But those have little to do with the current prices – lack of supply is the problem. Nearly half of the U.S. oil pipeline capacity isn’t being utilized right now because of the supply problem, he said.

“I think gas prices in Michigan are on the road to $4 a gallon,” De Haan said. “It’s really less a matter of ‘if’ but ‘when.’ It’s less because of a president and more because of what’s going on with Russia. We’re just in a tough spot right now.”

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