Back to $4 Gas

Three dollars and change at the pump. The cost of livin's high and goin' up.

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CNN Business (“$4 gas could be here by Memorial Day, GasBuddy predicts“):

Pain at the pump will get worse before it gets better.

That’s according to a new GasBuddy forecast that predicts the national average will rise to $3.41 a gallon in 2022, up from $3.02 a gallon this year. That would reverse some of the recent relief American drivers have received as gas prices have slowly backed away from seven-year highs.

The GasBuddy forecast, shared exclusively with CNN, projects prices at the pump will peak nationally at a monthly average of $3.79 in May, before finally retreating below current levels by late 2022.

“We could see a national average that flirts with, or in a worst-case scenario, potentially exceeds $4 a gallon,” said Patrick De Haan, head of petroleum analysis at GasBuddy, an app that tracks fuel prices, demand and outages.

That would amplify the inflationary pressures hitting American families grappling with the biggest price spikes in nearly 40 years. And it would add to the White House’s political headaches.The national average at the pump fell to $3.29 a gallon on Monday, according to AAA. That’s down by 13 cents from the peak of $3.42 on November 8.The call for gas prices to rise further in the coming months stands in contrast with forecasts from the government and some, though not all, on Wall Street.The US Energy Information Administration said on December 7 the national average will likely drop to $3.01 a gallon in January and fall to $2.88 for 2022. Citigroup likewise predicted a “radical drop” in energy prices, including a potential bear market for oil next year.

As I’ve often noted, Americans are irrational when it comes to gas prices. Because—unlike any commodity I can think of—the price is displayed in giant signs we can see from the road, we know down to the penny what we’re paying, we’re incredibly sensitive to fluctuations.

Myself included. While I’m naturally price-aware and try to get good deals on purchases, I’ll time my fillups based on when I know I’ll pass stations that have the lowest prices, even if I’m running on fumes when I get there.

But here’s the thing: gas prices have always fluctuated both seasonally and in response to various global economic forces. Here are the US national averages over the last three decades:

Yes, $4 gas would indeed be an anomaly. But I remember paying that back in 2008. And it’s been much higher than that for those who use premium grade gas. (And those of you who live in California are laughing wildly at the notion of $4 gas being high.) And, hell, I remember paying that much for gas in Germany in the late 1980s.

And, of course, this figures are in nominal dollars. The $4 I was paying in the summer of 2008 is equivalent to $5.05 in today’s money. Pew Research presents this graphic illustrating the point:

Looking at the constant dollars line, it’s apparent that, while prices are higher now than theywere from 1993 through 2005, they’re lower than they were most of the eight years after that (with the notable exception coinciding with the greatest economic collapse since the Great Depression). They mostly seem high right now because we’re comparing them to the demand trough we experienced at the height of the COVID shutdown.

Pew’s Drew DeSilver adds,

Americans are acutely sensitive to gasoline prices, especially when they’re on the rise. One reason, of course, is that we buy a lot of gas: an estimated 570 gallons this year for the average driver, which at current national average prices would cost close to $2,000. Also, gas prices are posted all over town on large signs – unlike, say, milk prices - and people typically buy gas on its own rather than as part of a larger shopping trip, making price changes more noticeable. And gas prices can and do swing sharply and unpredictably, in ways that can seem unconnected to the rest of the economy.

[…]

Since 1994, average gas prices have fluctuated between a low of 96.2 cents a gallon in February 1999 and a high of $4.114 in July 2008. The current average price, in fact, is almost exactly what it was in September 2014 – at least on a nominal basis.

When inflation is factored in, today’s prices appear more modest. In today’s dollars, gas cost an average of $5.20 a gallon in June 2008, and more than $4 as recently as September 2014.

Also, gasoline is not a single, uniform product. Besides regular, midgrade and premium gas, which differ by octane rating, there’s conventional and “reformulated” gas. The latter is required to be sold in California, along the Northeastern seaboard and in several other major urban areas to reduce smog and other air pollutants.

Over the past year, reformulated gas was consistently 30 to 35 cents more expensive than conventional gas until mid-October, when the differential began to widen, according to an analysis of EIA price data – it’s­ now about 46 cents more expensive. Over the same period, midgrade gas has ranged from 37 cents to 46 cents more expensive than regular, while premium has been 25 to 27 cents higher than midgrade.

Two of our cars run on Regular, which in these parts is almost always an ethanol blend, and the third on Premium. For most of my gas-buying lifetime, which dates to roughly 1982, the pricing went according to this formula: Regular=$X, Midgrade=$X+10 cents, and Premium=$X+20 cents. A few years back, that predictability went away with Premium now often wildly more expensive (apparently owing to increased demand and production issues.)

Another phenomenon that I’ve only noticed in the last several years is the propensity of various businesses to start adding a “surcharge” to account for higher fuel costs. I guess they figure that customers are more understanding of that than they are of simply raising prices.

FILED UNDER: Economics and Business
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Sleeping Dog says:

    And very little is demagogued like gas prices.

    I can remember filling the tank at $0.28/gal and then it doubled within weeks! Then it went to over a $1.00/gal!

    HL92 and JohnSF should be laughing at this as they are probably paying ~$7/gal.

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  2. OzarkHillbilly says:

    I must be the only person in the world who pays *no attention* to the cost of gasoline. When my truck gets low, I fill it up.

    ** except as a topic of political arguments, and even then I usually don’t know what I last paid. I think it was $3.029 2 days ago, but I could well be wrong.

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  3. HarvardLaw92 says:

    We just had a refinery go BOOM in Texas recently. That’s driving part of it / isn’t going to help.

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  4. Mu Yixiao says:

    I filled up this morning. $2.79/gal. 🙂

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  5. HarvardLaw92 says:

    @Sleeping Dog:

    HL92 and JohnSF should be laughing at this as they are probably paying ~$7/gal.

    Roughly $7.55 per gallon. The most recent prices here have been running about €1.75 per liter.

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  6. Tony W says:

    California, wisely, is always about $1 higher than the rest of the country.

    Socializing the incredible environmental and societal damage caused by automobiles is irresponsible, and encourages more car usage.

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  7. Stormy Dragon says:

    One thing to note here is that the ethanol blends make the gas more expensive, reduce mileage, and shorten the lifespan of your engine.

    It only exists because of the corn lobby.

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  8. EddieInCA says:

    We pay over $5.00 (91 min octane) regularly for the past 8 months here in Los Angeles. It’s the biggest reason I’m switching to an EV. I spend more than $700 on gas per month between our three cars.

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  9. Scott F. says:

    @EddieInCA:
    Same here in the San Diego area, though I’m paying less for gas by buying at Costco. (Gas prices alone justify my Costco membership.)

    And my thinking the same on an EV. I’d say if higher gas prices accelerate the transition to electric vehicles, that‘s a good thing.

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  10. Michael Reynolds says:

    I saw the headline and thought, ‘prices are dropping?’

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  11. Mister Bluster says:

    @Stormy Dragon:..ethanol blends make the gas more expensive, reduce mileage, and shorten the lifespan of your engine.

    I have never been a fan of ethanol. I don’t have any choice but to use it. I have seen “alcohol free” gasoline but it is not widely available and the pump price is usually exorbitant. The spin that I have heard in response to “shorter engine lifespan” is that modern internal combustion engines are designed to “burn corn”. All I know for sure is that my Ford Fusion that I bought new in 2013 turned over 200,000 miles recently on routine maintenance. Maybe I should seek out pure gasoline, pay the price and run my Ford to 300,000 miles.

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  12. Just nutha ignint cracker says:

    @Sleeping Dog:

    HL92 and JohnSF should be laughing at this as they are probably paying ~$7/gal.

    Yeah. In 2008 I moved to Korea for a teaching job and gas was about 1699 KRW per liter. With the exchange rate at ~1000KRW=$1US that was about $6.45 per gallon.

    And people who rode scooters tuned the engines to run on paint thinner. (I remember asking an adult student how scooter drivers felt about the gas prices. He replied, “Gas? Nobody runs a scooter on gas.”)

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  13. Kathy says:

    @Scott F.:

    But once EVs dominate, will there be a similar obsession with the price of electricity?

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  14. Just nutha ignint cracker says:

    And the last time I filled up, just before going to Portland to visit friends for Christmas, I paid $3.699, but only bought 6 gallons for a 7.9 (I think) gallon tank. I’m still price sensitive even though I can’t even make pocket change for seeking lower prices.

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  15. Just nutha ignint cracker says:

    @EddieInCA: “I spend more than $700 on gas per month between our three cars.”

    I’d have to look it up, but I don’t think I spent $7oo on gas last year, but I can remember the bad old days living in Seattle when I routinely put 40 or 5o thousand miles a year on a car.

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  16. EddieInCA says:

    @Just nutha ignint cracker:

    Of the $700 per month I spend on gas, only about $100 per month is my wife’s gas expense. I alone spend $600 per month on average. I’ve actually been doing research for about three months on EVs. I’ve decided on the 2022 Hyundai Kona EV. I was set to get the Hyundai Iqonic 5, but it’s on back under until March of 2022.

    I’ve already had the separate 220V charging plug installed at my house in anticipation of the new EV.

    Also, I have no idea why, but price out used EVs. They’re more expensive than buying new. Use Teslas are going for more than new Teslas. I can’t understand why.

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  17. James Joyner says:

    @EddieInCA: I gather one still has to wait months for a new Tesla, so the impatient might be willing to overpay for used to jump the queue.

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  18. JohnSF says:

    @Sleeping Dog:
    @HarvardLaw92:

    HL92 and JohnSF should be laughing at this as they are probably paying ~$7/gal.

    Laughing through the pain.
    I think the latest estimate for UK (converting from £/liter) is $9.2
    UK currency depreciation is nasty.

    Just back from three days in Cornwall visiting relatives, petrol cost both ways about $110 if my arithmetic is working.
    Damn.
    Worth it, but not going to be nipping down every weekend. 🙂

    (At least I’m not driving HL92’s V12 beastie, LOL)

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  19. JohnSF says:

    UK currency depre@EddieInCA:
    Well, in UK used cars are all at a premium at the mo’, due to shortages in new car production due to supply chain issues (main issue seems to be specialised IC chip shortages from Far East).
    And EV’s/hybrids especially priced up due to demand.
    Demand, for reasons my previous post should make pretty obvious.

    But it’s still tricky to price long term value for used EVs and hybrids, due to questions over durability of the battery packs in EV and the sheer complexity of a hybrid.

    Personally I rather desire this VAG Cupra Leon hybrid if available at reasonable price second hand when it’s time to retire my current car.
    But it all depends on relative price.
    If it’s too much, an efficient petrol or turbo-diesel will have to do.

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  20. HarvardLaw92 says:

    @JohnSF:

    To be fair, I don’t drive it that often myself.

    For one, I will not drive in Paris other than to leave it as quickly as possible. Ever. I can handle it long enough to get out of the city headed elsewhere, but intracity driving here is terrifying. Root canal surgery without anesthesia frightens me less. For another, the longer we’ve been here, the more I find myself walking about everywhere, even to the office, just out of sheer enjoyment. This is one of the most walkable cities in the world.

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  21. JohnSF says:

    @HarvardLaw92:
    Heh.
    Reminds me of living in London (many years ago): no way would I ever have a car living in London.
    Traffic a nightmare, parking impossible, and public transport to good to need it.
    And also, central London similarly fairly walkable.

    Only driven in Paris once, on the way to Perigord.
    Periph’, er, eek!

    Next time, went via Rouen.
    Mind, Rouen is pretty tricksy to navigate, but at least not full of maniac Parisiens. 🙂

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  22. Mu Yixiao says:

    Gas went up a more than a nickle while I was at work.

    Filled up at $2.799 this morning, this evening it’s at $2.869

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  23. Just nutha ignint cracker says:

    @Mu Yixiao: Good catch on that fill up timing!

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  24. liberal capitalist says:

    @Kathy:

    But once EVs dominate, will there be a similar obsession with the price of electricity?

    Already was there… to save costs, I had the utility put in a meter that allowed lower rates at night, and that is then the Bolt got charged.

    Because who wants to pay full price?

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  25. HarvardLaw92 says:

    @JohnSF:

    I meant to add earlier that the only place where driving frightens me more is London. Worse traffic, incomprehensible road layout, and everything is backward from what’s intuitive for me. I’d be lucky to survive; there is no chance I wouldn’t cause a crash. It would happen.

    I literally go out of my way when leaving the city to avoid the Periph. We go to Brittany, and I’ll add probably half an hour to the trip using a different route just to avoid 6km of that horrific roadway. Go the other way and I’d have to navigate CdG, which is worse.

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  26. de stijl says:

    Best commute I ever had was living downtown in a building connected to the skyway and my commute was a 11 minute 7 block walk to my work building. Elevator, skyway, elevator.

    On day in January I realized I had not actually been outdoors in at least three weeks. You could go to bars and nightclubs and restaurants.

    Made a new rule – warmer than 20F, you walk the streets like a pleb. Mostly.

    Living on the skyway is like living in a dispersed, crazy mall. It goes on for miles. I became a savant at navigating it.

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  27. SC_Birdflyte says:

    @HarvardLaw92: Just so. The time I spent in Paris (73-74) was wonderful. If I couldn’t walk somewhere, I could catch the Metro to get there.

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  28. grumpy realist says:

    @SC_Birdflyte: That’s Tokyo and several other Japanese cities. People don’t use cars that much because there’s no place to park them. I estimate 1/2 of the vehicles on the road in Tokyo are delivery trucks, 1/3 are taxis, and the rest are people who got lost taking the wrong turn off the by-pass around/under Tokyo. Oh, and no, you don’t want to ask about the cost of gas. Ever.

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  29. John430 says:

    @Tony W: Socializing the incredible environmental and societal damage caused by automobiles is irresponsible,

    To say nothing of the Democrat mismanagement of California’s resources, peoples and societal more`s. California is now the land of Left is Right, Up is Down and Love is Hate. Oh, and did I leave out Wrong is now Good?

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