The History of Gas Prices
As gas prices reach record highs across the country, putting those price rises into historical context helps consumers – that’s all drivers – better appreciate the impact of oil prices on everyday life. Since 1929, the year which saw the start of the Great Depression, the price of gas has shaped the American experience.
Gas Prices in the US Throughout History
In January 1929, the price of one gallon of gas was 21 cents. Today, that’s equivalent to $3.48 when adjusted for inflation. That equates to the price of fuel in 2021, when prices were slowly increasing after facing low demand in the early months of the 2020 pandemic.
During the ensuing decades, gas price changes were relatively gradual. As you’d expect in a (somewhat) free market and with international suppliers, prices reacted to demand, supply fluctuations, and general market conditions.
1970s Energy Crisis
Political factors have often impacted fuel prices more dramatically than market conditions. Two Middle Eastern conflicts, the Yom Kippur War in 1973 and Iranian Revolution in 1979 made the 1970s a turbulent time for most Western counties.
Just as US oil production peaked between 1960 and 1971, the Organization of Arab Petroleum Exporting Countries began an oil embargo in October 1973. The decision was in direct response to the US and other Western allies’ decision to arm Israel during the Yom Kippur War. OPEC announced it would lower oil production by 5% every month until outside nations stopped supporting Israel and Israeli troops abandoned occupied territories in and around the Golan Heights and Sinai.
The embargo remained in place until March of 1974, and while economists debated how effectively the action prevented support for Israel, it impacted everyday life. As production dropped, prices shot up. “Oil as a weapon” wreaked havoc for American consumers in several ways:
The price of oil quadrupled between 1972 and 1974
The US was forced to ration gasoline for months
Oil prices contributed to an economic condition called “stagflation”
2002-2008 Sees Gas Prices Inch Higher
Over a six-year period between 2002 and 2008, gas prices increased from $1.36 to $3.27 per gallon. While gradual, the price of gas saw several spikes throughout the period, most notably due to the Second Iraq War. Uncertainty in the Middle East, the emergence of Russia as a top oil producer, and regime change in oil-producing countries in South America all contributed to a steady increase in prices. Only the economic turmoil of the Great Recession, triggered by the subprime mortgage crisis, lowered demand and, eventually, leveled off gas prices as well.
See US Retail Gas Prices Since 1990
Gas Prices in the Near Future
The combination of the Russian invasion of Ukraine and inflationary conditions as the result of the 2020 pandemic make the future of gas prices murky. The effective ban on Russian oil means much of the Western world faces a low fuel supply just as consumer demand increases during the summer months. There are signs that demand for gasoline is declining in response to high prices, with consumers buying 1.8% less gas than forecasted in the first weeks of June 2022.
Fuel prices are expected to stay high through the summer of 2022, though it is unlikely that $5 gas is a fixture of American life in the long term.
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