Why Are Gas Prices So High?

Gas prices surged in 2021 and 2022 amid economic disruptions caused by the pandemic and Russia’s invasion of Ukraine — and they’ve never been the same. Today, gas prices are 30% higher than they were five years ago.

What’s keeping gas prices so high? Seasonal factors, supply-chain disruptions and gas tax hikes can play a role. But elevated oil prices are the main culprit.

The cost of oil typically represents more than half of the cost of a gallon of gasoline, according to data from the U.S. Energy Information Administration (EIA). So, a major reason gas prices are so high is that oil prices are still higher, on average, than they were before the pandemic and Russia’s invasion of Ukraine. That’s based on the price of West Texas Intermediate crude, which is used as the benchmark for oil prices in North America.

Keep in mind that gas prices at the pump rarely reflect that day’s market conditions. Instead, they represent costs incurred weeks, even months before. That lag makes prices slower to rise and fall than news headlines might suggest. And while spot shortages, refinery production shortages or blending issues can drive up gas prices locally, big, nationwide swings in gas prices are almost always due to the price of crude oil.

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Yes, gas prices have gone up

The average per-gallon price of regular gas was $2.601 in 2019, according to EIA data. Then, following Russia’s invasion of Ukraine, the national average peaked at $5.016 per gallon on June 14, 2022, according to AAA. Since then, gas prices have retreated, but they haven’t returned to pre-pandemic levels.

But they're dropping right now. Here's why

Gas prices have been dropping for weeks because of the declining price of oil. Low consumer demand and a return to winter-blend gasoline also are contributing to falling prices. At the moment, these are short-term trends happening within the larger picture of elevated gas prices.

Here’s how gas prices compare today:

• The average regular gas price in the U.S. as of Oct. 10 is $3.212 per gallon, according to AAA, which tracks gas prices. 

• The national average is 12 cents higher than it was at the start of the year, following familiar seasonal patterns. 

• But today’s price is 5 cents lower than last month’s average of $3.325 per gallon.

• The price a year ago was $3.682.

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Average gas price per state

The average gas price per state varies widely. A gallon of regular fuel costs about $1.94 more in the state with the highest average price of gas (California) than in the state with the lowest average (Georgia).

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How are gas prices determined?

Gas prices are determined by a complex set of factors that are at work long before the gas gets to your local station. According to the U.S. Department of Energy, those factors include:

• The cost of raw crude oil, which fluctuates based on international supply and demand.The cost to refine crude oil into gasoline, which rises during warmer months.Taxes, which vary state-to-state.

Learn more about each of these factors below.

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Why are California gas prices so high?

California tends to have the highest gas prices in the country because of the state’s environmental regulations, taxes and unique self-reliance on refining its own gasoline.

Did you know that the gasoline sold in California is different from gasoline sold anywhere else in the United States? Since the ‘90s, California has mandated that any gasoline sold in the Golden State be produced according to strict guidelines that reduce the gasoline’s overall emissions. As you might expect, California’s cleaner fuel blend is more expensive than the gasoline used by the rest of the nation.

Because of these regulations, more than 90% of gasoline used in California is refined in the state, according to the California Energy Commission. So, if any of the state’s refineries experience unplanned outages or disruptions, those gas prices climb even higher, since the state can’t boost its gasoline supply by importing dirtier fuel that wasn’t refined according to its regulations.

Also, gas prices are high in California because there’s just less gasoline being refined in the state. In late 2022, California ​​mandated that all cars, trucks and SUVs sold in the state be zero-emission vehicles by 2035. Because of that, California’s refining industries are beginning to transition away from fossil fuels, according to The Hoover Institution, a public policy think tank at Stanford University.