A 103-Year Gas Price History
While food, water, and shelter are considered the three basic human needs, functioning in modern society is a bit more complicated. For example, we need to stay connected to the Internet to keep up with the constant flow of information. And for most of us, it's essential to keep our cars full of gas so we can get to work, buy groceries, and visit Grandma.
Most Americans travel in a car regularly, and there's one automobile for every 1.3 Americans. Since gasoline is such an essential part of what we do, our lives can be affected significantly when its price changes. It's interesting to see how the affordability of gas has changed throughout the past century, so we put together this visual showing gas price history over the past 103 years.
Highest Gas Prices in U.S. History
After adjusting for inflation, gas was actually most expensive all the way back in 1918. It was only $0.25 per gallon, but today, that amounts to $4.27. The average cost of gas over the course of a year never reached $4 again, though it came close in 2011. In that year, it reached $3.48 per gallon; after adjusting for inflation, that comes out to $3.99 per gallon today. With the way the value of a dollar fluctuates, that number could exceed $4 in the next couple of years.
Readers may remember when the price of gas jumped over $2 for the first time, in 2004 and 2005. Families were debating whether or not they would be able to afford their annual road trips. Granted, it was an unusually sharp increase, though after adjusting for inflation, gas was still cheaper than it was before the early 1980s.
Oil Price History
To understand gas price history, we must also explore oil price history. Crude oil is a natural resource, a fossil fuel created when dead organisms are pressurized under sedimentary rock. Prior to the 20th century, the primary use of oil was heating our homes and keeping the lights on. Now, when we hear about a rise in oil prices, most of us think about our local gas station. This is because gasoline is made from crude oil.
That being said, the supply and demand for oil heavily impacted the cost of gas throughout the past century. In most cases, when there is a sharp change in the price of gas, it can be associated with an international conflict, economic recession, or change in the federal gas tax. Let's explore some variables in gas price history.
Variables Affecting the Cost of Gas
The cost of gas changes often and quickly due to factors that impact world oil production. For example, in 1930, a large oil field was discovered in Texas. The cost of oil dropped 66% that year. And in 1956, the Suez Canal was blocked and European countries could not get the oil they needed, so the United States exported significantly more than usual, affecting the cost of gas.
In the 1970s, the Arab members of OPEC (the Organization of Petroleum Exporting Countries) announced an embargo on oil for any countries they believed were supporting Israel, which lowered the supply and increased the demand in the United States. For a period in 1974, gas prices rose 50% in cities and up to 84% in some rural areas. Many thought gas guzzling cars were on their way to extinction.
Economic recessions and wars can also have an impact on the cost of gasoline. People are driving less in 2020 due to the COVID-19 pandemic, and the cost has decreased as a result. Currently, the average cost of gas is around $2.26 a gallon. This is comparable to the cost of gas after that spike in 2004–05 and a steep decrease from the peak in 2011.
It was during the 1910s that the consumption of oil in the United States began increasing dramatically, due primarily to a boom in personal automobile sales. At the start of the century, only one in every 10,000 people owned a car. By 1920, 8.7% of people owned a motor vehicle. The increased need for oil was referred to by historians as the country's first oil shock.
Subsequent oil shocks have occurred periodically throughout the past century, often as the result of a geopolitical conflict. For example, production of oil in both Iran and Iraq was halted nearly completely in 1980 when the latter attacked the former. Likewise, when workers in Venezuela went on strike in 2002, less oil was produced and exported. In both cases, the conflict reduced the supply of oil and increased the demand for as well as the cost of gas.
Federal Gas Tax
The federal gas tax must be paid by drivers every time they fill up. Originally, gas taxes were enacted by the states, but it became a federal policy in 1932 when the government imposed a tax of 1 cent per gallon. The gas tax was intended to be temporary, one of many policies designed to lead the United States out of the Great Depression. But as with many taxes, the government "forgot" to stop collecting it, instead raising it repeatedly in the years to come.
The federal gas tax was raised to 1.5 cents in 1940 prior to World War II and raised again to 2 cents in 1951 to help fund the Korean War, though the price of oil itself was frozen during this time by the Office of Price Stabilization. In 1956, the tax was raised yet again, though this time, Congress dedicated all revenue to pay for the interstate highway system we still use today. The gas tax was raised many more times over the following decades, with the most recent rate of 18.4 cents per gallon enacted by Congress in 1993.
Written By: Edson Farnell | Email |
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