Five Facts on US Gasoline Prices

The Big InsightCurrent high gas prices are the result of a series of unique factors including COVID, the war in Ukraine, production and distribution limits, and the supply chain crisis, with even higher prices expected.

The average cost of a gallon of gas hit $4.60 this week — and analysts anticipate the cost to rise further over the summer. The high price is due to an unusual set of interlocking dynamics that will likely need bipartisan action to fix.

1. The surge in U.S. gasoline prices during the first weeks of the Russian invasion of Ukraine was the swiftest on record.

U.S. gas prices jumped from $3.53 three days before the invasion to $4.32 on March 14 — a 22% jump that was the fastest over a three-week span since the U.S. Energy Information Administration began tracking such data in 1990. While the U.S. imported only about eight percent of its oil supply from Russia before an embargo was imposed, the war has severely disrupted global supply.

The price before the invasion was high, but not abnormally so. In most recent years, the inflation-adjusted average cost per gallon was between $2.50 and $3.44. The inflation-adjusted low of $1.78 was hit in 1998, and the inflation-adjusted high of $4.33 in 2012.

2. Crude oil prices are down more than 20% from their March high — but gas prices have not experienced a similar drop.

According to The Washington Post, gas station owners take losses when prices surge, as they try to remain competitive while also dealing with a decline in customer demand as consumers drive less. They “can make up for those losses by being slow to lower pump prices as crude prices fall.”

However, they are not likely to lower prices as the upcoming vacation season further increases demand. According to JPMorgan, “expectations of strong driving demand” throughout the summer driving season could raise prices to $6.20 per gallon before Labor Day. Energy Intelligence research director Abhi Rajendran says prices at the pump are unlikely to decline before the fall at the earliest.

The White House is considering tapping the Northeast Home Heating Oil Reserve to deal with diesel fuel shortfalls, but the reserve only contains about one day’s supply — and while more diesel would help truckers and industry, it would not aid everyday drivers.

3. Gas prices fell to less than $2 per gallon during the height of the COVID pandemic — but production cuts then are impacting prices now.

In April 2020, the average U.S. cost was just $1.94 per gallon. Prices were largely back to normal by one year later. But global production cuts amounting to about 10% of overall supply continue to impact the market. GasBuddy head of petroleum analysis Patrick De Haan said in March, “We’re nearing pre-COVID levels for consumption, but production is still lagging. OPEC didn’t start increasing production until July 2021. They were already too late — they were severely behind the curve.”

4.  U.S. oil production now is higher than it was when President Biden took office.

While some critics of President Biden have faulted his energy policies for oil supply issues, U.S. Energy Information Administration data show that the U.S. was producing 11.6 million barrels per day in March, compared to an average of 11.3 million barrels per day in 2020. The Biden administration issued more than 3,500 new permits to drill on federal lands in its first year — 34% more than the Trump administration did in its first year.

But in the wake of the pandemic slowdown, energy companies have been cautious about ramping up output, constructing more wells but limiting new production. In addition, supply chain and labor supply issues have hindered distribution of oil that is being produced domestically. And the administration has limited supply in some ways, such as a temporary freeze on new drilling leases.

5. Current gas taxes average just under 50 cents per gallon — about 10% of the price at the pump.

The federal tax is 18.4 cents per gallon, while state taxes and fees average an additional 31.02 cents per gallon. In California, the overall tax is more than 86.5 cents per gallon. Some governors, like Maryland’s Larry Hogan, suspended state gas taxes during the price surge earlier this spring in order to offer consumers relief. The challenge of providing relief for consumers from Washington is substantial: The gas tax is dedicated to infrastructure needs and various ideas about rebates or subsidies have so far proven impractical.

No Labels is an organization of Democrats, Republicans, and independents working to bring American leaders together to solve problems.

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