Why is Gas So Expensive Right Now: 6 Reasons You Need To Know

Why is Gas So Expensive Right Now: 6 Reasons You Need To Know

For the millions of people who drive cars and trucks every day, the cost of gas has more than doubled in the last two years.

At the gas pump, a rare convergence of economic and geopolitical forces is now visible. The economy’s quick recovery from the pandemic increased the demand for gasoline, which raised prices. Then, the invasion of Ukraine sparked a global backlash against Russia, which produces more oil than all but two other nations. As a result, prices rose once more.

Why is Gas So Expensive?


The big, bad I-word will be discussed first. Gas prices have been greatly impacted by the absurdly high inflation rate, which is currently 8.2% over the past 12 months—the highest in about 40 years. Since December 2020, when gas was about $2.25 a gallon, gas prices have increased.

Russia-Ukraine War

Let’s be clear once more: Gas prices were rising even before Russia invaded Ukraine. However, the conflict between Russia and Ukraine undoubtedly added more fuel to the fire.

The average price of a regular gallon of gas reached an all-time high (at the time) of $4.17 on March 8, 2022, breaking the previous record from 2008. Overnight, gas prices increased by 11 cents, and by more than 50 cents from the previous week! That’s insane.

The same day, President Biden issued an executive order prohibiting the import of coal, natural gas, and oil from Russia into the United States. Because Russia is one of the largest oil exporters in the world, this is significant. Absent the day-old hot dogs, it’s essentially just a huge gas station.

On June 14, 2022, gas prices peaked at $5.01, after which they went on a long, irrational streak of record highs. After reaching a record high, gas prices gradually decreased throughout the summer, eventually approaching the mid-$3 range. However, they have recently begun to gradually climb back up.


Even without all the other things happening in the world, gas prices typically decrease in the fall after the end of the summer travel season and in the winter after the conclusion of the holiday travel season. Currently, the national average for gas is $4. That alone may be enough to convince some people to scale back their holiday travel plans. Others, however, are willing to pay the money and accept it as the cost of spreading holiday cheer.

Crude Oil Prices

Investigating additional factors is necessary in order to understand why gas prices are so high. The increase in the price of crude oil also has an impact on gas prices. Russia is a significant oil exporter, as we previously mentioned, and the conflict caused oil prices to soar to over $120 per barrel. Crude oil currently costs in the $90 to $110 range per barrel.

But after OPEC+ (Organization of Petroleum Exporting Countries) declared it was reducing oil production in order to raise prices, oil prices may be headed back up. The oil-producing nations that make up OPEC+ work to keep oil prices under control. The United States really has little power to prevent them from raising prices one day (by reducing production). That sucks, right?

OPEC+ typically seeks to strike a balance between maximizing profits and avoiding sharp drops in demand by raising prices too high.

Oil Refineries

Oil refineries are a major factor in the recent spike in gas prices. Low gasoline supplies are one thing, but low refinery capacity is quite another. That is what is happening right now. Refineries increase their output of gasoline at the beginning of a typical year to have a supply going into summer. Oh, no, not this year. The seasonal low for gas inventories since 2019 has been reached.

You can add one more item to the list at this point. The goal of President Biden is to wean the nation off of the use of gas-powered vehicles. He halted construction of the Keystone XL oil pipeline soon after taking office. Due to their perception that clean energy laws are driving them out of business, gas companies have little incentive to invest significant sums of money in the construction of new refineries.

Energy Markets

Oil and energy markets abroad are also making things difficult on the supply front, in addition to the slowdown in domestic oil production.

OPEC and other major oil-exporting countries have repeatedly agreed to only modest increases in production, despite oil consumers like the US and India pushing for higher exports, according to CNBC. Following President Joe Biden’s direct call for more production to lower rising prices, the cartel most recently decided to increase production by just 400,000 barrels per day in December. But it’s a delicate balance, as shown by some cartel members’ response to Biden and other world leaders tapping their strategic oil reserves: a reported pause in ramping up production.

It also demonstrates the continued dominance of the cartel of oil exporters on the world oil markets, despite a dramatic rise in US production over the past ten years and the global transition to cleaner energy sources.

Broader energy markets have been facing supply shortages as well. Prices for electricity and natural gas have skyrocketed in Europe, and traders anticipate continued increases in the cost of oil and other forms of energy for months to come. Russia, a key provider of natural gas to the EU, has held back on increased deliveries to the West, keeping prices volatile and high.

It should come as no surprise that gas prices are rising when you combine rising demand brought on by the US economy reopening with supply constraints both domestically and internationally.

Why is Gas So Expensive Right Now: 6 Reasons You Need To Know

How Are Prices Set?

Each nation has a unique system for determining gas prices. There isn’t a single global gas price.

How much it costs energy companies to purchase gas from domestic and foreign producers is what determines wholesale gas prices. With changes in global demand, the price of natural gas fluctuates.

Gas prices on international markets can also increase as a result of speculation and worry about impending disruption. This could increase gas prices for homes and businesses.

For instance, the UK National Balancing Point (NBP), which takes into account gas present anywhere in the nation’s transmission system, is used to determine the spot price in that country. Gas from other countries is included in it to make international trade between buyers and sellers easier.

The NBP must now be higher in order to draw imports given that European nations have now entered the market for the remaining unsold LNG in the world.

A typical household gas bill in the UK includes the wholesale price, the energy provider’s operating expenses, the cost of network maintenance, and taxes like VAT and environmental levies.

How to Save Money on Gas

Join Gas Rewards and Cash-back Programs.

You can sign up for gas rewards programs at stores where you already shop, like Kroger and Costco (just make sure you’re signing up for free rewards and not credit cards). Don’t forget to look into cash-back apps like GetUpside to put some extra money in your pocket every time you fill up at the pump.

Use Apps to Track the Cheapest Gas Prices.

Speaking of apps, you don’t have to waste gas driving around town looking for a good deal. For that, there is an app! To avoid driving around looking for the best gas deals, use an app like GasBuddy or Waze to find the prices in your area.

Make One Trip.

This week, do you have a lot of errands to run? Knock them all out in one trip instead of making eight different trips to the store during the week. Your mental health and your gas tank will be saved.


Carpooling does occasionally get a bad rap, but give us a chance. Carpooling to the office, to school, or to the kids’ soccer game is a great way to build some human connection while saving money on gas too. You can’t beat that!

Furthermore, having someone else drive one or two days a week is a nice break if you’re usually barely awake during your morning drive or detest battling traffic. It’s kind of like having a chauffeur (without the black suit and hat).

Adjust Your Budget.

Here’s the thing: In order to make your budget work, you’ll need to rearrange some expenses due to the skyrocketing cost of gas. It’s unfortunate, but it’s not the end of the world. All you need to do to increase your gas line item is make a few small budgetary cuts in other areas.

That may entail forgoing a few of your Friday treat-yourself fancy coffees or delaying the purchase of that new dress until the following month, but that’s okay. Rearrange things until you feel your budget is in a good place.

When Will Gas Prices Go Down?

Gas prices should stay high for several weeks, if not months, according to experts. Bill Adams, the chief economist at Comerica Bank, predicted in a report that overall inflation will likely worsen in March and April before improving.

As a result of the knock-on effects of the Russia-Ukraine war, prices at supermarkets, gas stations, and utility bills will increase even more in March and April.

According to polls, the onslaught of rising prices is having a negative impact on consumer confidence.

It was not surprising that the University of Michigan consumer confidence index dropped to an 11-year low in early March, given the rising cost of gasoline and the predominance of the Ukraine conflict in the news.

Many experts believe that while inflation may start to decline later in the year, it will still likely remain high. By September, the headline rate, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics, will drop to 5.5%, almost three times the Federal Reserve’s 2% target.

According to a tweet from De Haan on Monday, if oil prices stay below $100 for some time, motorists may eventually experience some relief at the pump as gas prices drop below $4 per gallon.

The Bottom Line: Unpredictable

Given the ongoing conflict in Ukraine, gas prices might continue to be unpredictable. If consumers want to save money at the pump, they should avoid premium gas and, if at all possible, drive a smaller, more fuel-efficient vehicle.

Arya Wang

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