Gas prices may have recently hit the highest levels in AAA’s records, but were we really experiencing the most expensive gas the country has ever seen? Not if you take into account how much everything else costs.
If you consider how much overall price inflation has eroded the value of a dollar over time—especially with the recent rampant inflation—then we’re far from the priciest gas ever, Gilbert Metcalf, a professor of economics at Tufts University, pointed out in a recent blog post at the nonpartisan economics publication EconoFact.org. As the chart below shows, in today’s dollars, “real” gas prices—that is, prices adjusted for inflation—were higher in most months between 2011 and 2014. And in 2008, gas averaged as high as $5.36 a gallon.
The inflation-adjusted data lends a little bit of perspective, if not actual relief, to the recent pain at the pump. It’s also a reason to think twice about whether gas tax holidays are a good idea, according to Metcalf (since cutting the gas tax wouldn’t reduce gas consumption but would undermine efforts to lessen our reliance on oil, he said).
In a matter of weeks, the war in Ukraine pushed the national average for a gallon of gas up about 80 cents to a record high of $4.33 on March 11, according to data from AAA. Russia’s invasion of Ukraine triggered the increase as Western nations sanctioned Russia, a major global petroleum exporter, driving up the price of the crude oil gas is made from. Since then, gas prices have slowly started to come down as the price of oil has stabilized with government decisions to release supplies in reserve.
“Although they have seen a steep increase in a short period of time, gas prices today are only slightly higher than their average value over the past thirty years when accounting for general price inflation,” Metcalf said in the blog post.
Have a question, comment, or story to share? You can reach Diccon at email@example.com.
Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!