Paying at the Pump: A Timeline of US Gas Prices

Under normal circumstances, the price of a gallon of gasoline moves up and down with the price of crude oil. The price of crude oil, like other global commodities, is determined by the rules of supply and demand, and shifts in the global balance generally happen slowly and steadily. That is, until there’s an unexpected disruption.

“Most of the big gasoline price spikes have to do with something that’s going on in the Middle East,” says Jay Hakes, an energy historian and former administrator of the U.S. Energy Information Administration (EIA).

From the end of the Great Depression through World War II, U.S. gas prices were incredibly stable. The price of a gallon of gas never dipped below $0.17 or above $0.21 a gallon between 1929 and 1946. That trend continued through the 1950s and 1960s, with the average gas price increasing by just a penny or two each year.

That doesn’t mean that gas was dirt cheap, however. When adjusted for inflation, gas cost between $2.83 and $3.33 a gallon (in 2023 dollars) from 1950 to 1969, according to data from the EIA.

Looking at a timeline of U.S. gas prices, the trouble began with the two energy crises of the 1970s, both tied to geopolitical turmoil in the Middle East.

In 1973, the average price of gas was just $0.39 a gallon ($2.58 in 2023 dollars)—the cheapest in decades—but that was about to change.

Starting in the 1950s, the U.S. put quotas on oil imports to keep prices stable for domestic oil producers. This frustrated oil-producing countries like Saudi Arabia, Iran, Iraq, Kuwait and Venezuela, which banded together in 1960 to form the Organization of Petroleum Exporting Countries (OPEC).

By the early 1970s, U.S. producers weren’t able to keep up with demand. Not only were there more cars on the road, but oil was one of the main fuels for generating electricity, which was in high demand since the advent of air conditioning. In April 1973, Richard Nixon removed Saudi Arabia’s import quota to increase the oil supply and keep prices steady. As it turned out, it had the opposite effect.

In October 1973, a coalition of Arab states led by Egypt and Syria attacked Israel on the Jewish holiday of Yom Kippur. The U.S. responded with an airlift of supplies and aid to Israel. Because the Saudi government was staunchly anti-Israel, it convinced the other OPEC countries to issue an oil embargo against the United States.

“In April, we took the quotas off Saudi Arabia, and in October, they put the quotas on us,” says Hakes, author of Energy Crises: Nixon, Ford, Carter, and Hard Choices in the 1970s.

The price of oil nearly quadrupled from $2.90 a barrel before the embargo to $11.65 a barrel in January 1974. At the pump, that resulted in a 36 percent increase in the price of a gallon of gas, from $0.39 to $0.53 ($2.58 to $3.15 in 2023 dollars).

Even worse, there were gas shortages, leading to long lines at gas stations. The OPEC oil embargo ended in March 1974, but the shock of the energy crisis lingered, prompting the government to impose price controls, gas rationing and a national speed limit of 55 miles per hour on the nation’s highways.

As painful as they were, the gas shortages and price increases of 1973-74 were just a warm-up to the second oil crisis of 1979, when gas prices reached record highs.

In early 1979, the U.S.-backed shah of Iran fled the country and was replaced by Ayatollah Ruhollah Khomeini, a hardline Muslim cleric who characterized the United States as the “Great Satan.” As part of the Iranian Revolution, the government cut off oil exports to the U.S. If that didn’t put enough strain on the oil supply, Iraq then invaded Iran in 1980, causing further supply disruptions in the region.

When the second oil crisis hit, it was even more painful for American consumers, says Hakes, because the U.S. government had already taken so many measures to reduce demand and people were frustrated after years of shortages and sky-high gas prices.

“1973 was a shock to consumers, but there was a sense at the time that we have to suck it up and deal with it,” Hakes says. “There was this sense of patriotism, and people cut back their driving. That’s why the shortages and price shocks weren’t as bad. By the time you get to the late 1970s, people are getting sick of being asked to sacrifice and to drive 55.”

By 1981, the average gas price was up to $1.38 a gallon, which was 3.5 times as expensive as it was in 1973. Even when adjusted for inflation, the effect was significant. From 1973 to 1981, the average gas price in 2023 dollars went from $2.58 a gallon to $4.51 a gallon, a 75 percent price increase.

After 1981, a combination of increased oil supply and lower demand pushed the inflation-adjusted price of gas down year over year through the 1980s and most of the 1990s. The cost of gas reached an all-time low in 1998, when the average price for the year (for all grades) was just $1.06 ($1.98 in 2023 dollars). According to the Bureau of Labor Statistics, it was the lowest gas price since 1919, the first year the bureau kept records.

The 2000s were a different story. Oil and gas prices started to rise slowly at the turn of the millennium, but they really spiked after the U.S. invasion of Iraq in 2003, which disrupted oil exports from the region. Hurricane Katrina in 2005 also forced Gulf Coast refineries to close, further shrinking the oil supply. Meanwhile, oil demand was high from a booming U.S. economy and from emerging overseas economies like China and India.

The price of oil hit a record high of $145 a barrel in July 2008, up from a low of $20 a barrel at the end of 2001, when the U.S. economy was in recession. Since higher oil prices generally translate into higher gas prices, the average price at the pump increased by 140 percent from 2002 to 2008 to a yearly average of $3.27 a gallon ($4.77 in 2023 dollars).

Since oil companies were making record profits, they boosted production, not knowing that the Great Recession was right around the corner.

“There’s irrational exuberance when prices are high,” Hakes says. “Producers go gung-ho, and things can get out of balance pretty quickly.”

As millions of Americans lost their jobs, homes and life savings in the financial crisis, demand for oil and gas plummeted. Coupled with a high oil supply, that triggered a steep decline in oil prices over the second half of 2008 and into 2009. The price of a barrel of oil fell more than 70 percent from June 2008 to February 2009. The average price for a gallon of gas was back down to $2.35 ($3.34 in 2023 dollars) for 2009, a 30 percent decrease from the year before.

The highest gas price on record for any year belongs to 2012, when the average retail price of $3.64 a gallon was the equivalent of $4.88 in 2023 dollars. Gas prices were so high in 2012 due to a “perfect storm” of factors that included tensions with Iran over its nuclear program and major hurricanes in the United States.

Gas prices were already rising in 2010 and 2011 as the U.S. and global economy rebounded from the Great Recession, but the start of 2012 brought a fresh crisis with Iran. When Iran refused to allow U.N. inspectors to see suspected nuclear weapons sites, the European Union banned all oil imports from Iran, and the United States also imposed harsh sanctions. Iran retaliated by threatening to close the Strait of Hormuz, which would effectively block all oil exports from the Persian Gulf region.

The tensions caused oil prices to surge from $110 a barrel in November 2011 to $125 a barrel in March 2012. Later that year, Hurricane Isaac forced 78 percent of oil refineries in the Gulf of Mexico to halt production at a loss of 1.3 million barrels a day. Then Hurricane Sandy wreaked havoc on the East Coast, causing further disruptions and shortages. The result was the highest average gas price for any year since at least 1950, and prices remained high for the next two years.

The high gas prices of 2012 to 2014 were followed by markedly lower prices in 2015 and 2016, largely driven by the U.S. shale oil boom. With an influx of American oil, global oil prices fell by 70 percent from mid-2014 through 2016, one of the steepest price decreases on record. As a result, the average retail gas price in 2016 was just $2.14 a gallon ($2.72 in 2023 dollars).

The COVID-19 pandemic of 2020 proved just how low oil prices can go when supply greatly outpaces demand. For a brief window in April 2020, a barrel of oil on some markets was trading at less than zero dollars.

When governments around the globe ordered lockdowns in March 2020, demand for gasoline dried up. At the same time, OPEC and Russia were in a standoff over production cuts. When Russia backed out of a deal to lower its production, OPEC responded with its largest production increase in decades. Just as global demand for oil was at an all-time low, Saudi Arabia was producing a record-high 12.3 million barrels a day.

The glut of oil briefly drove crude oil prices into negative territory and resulted in some of the lowest gas prices in decades. In April 2020, the average price of all grades of gasoline was $1.94 a gallon ($2.28 in 2023 dollars). In 13 states, the price of gas even dipped below $1 a gallon.

On June 14, 2022, the average price for a gallon of gas broke the $5 barrier for the first time ever. Nationwide, the average cost of all grades of gasoline was $5.02 a gallon ($5.20 in 2023 dollars), the most expensive week at the pumps on record.

The sky-high gas prices of 2022 were driven by two major factors: runaway inflation and the Russian invasion of Ukraine.

The COVID-19 pandemic shuttered factories and disrupted global supply chains, creating shortages that drove up prices across the economy. From January 2021 to February 2022, the inflation rate climbed from 1.7 percent to 8 percent, the highest rate in decades. In 2021, gas prices were already up 40 percent from the pandemic lows, but they were about to get much worse.

On February 24, 2022, Russia invaded Ukraine. At the time, Russia was the second-largest oil producer in the world and provided 40 percent of all oil imported by the European Union. Fears over shortages of Russian oil rocked the oil futures market, and prices immediately started to go up at the pump.

The average retail gas price in the U.S. before the Russian invasion was $3.41 a gallon in January 2022. Four months after the invasion, gas prices surpassed $5.00 a gallon, a nearly 50 percent price increase. By the end of the year, prices came back down, making the year's average gas price $4.09 a gallon ($4.22 in 2023 dollars).

In 2012, global oil markets panicked when Iran merely threatened to close the Strait of Hormuz. In 2026, that worst-case scenario became a reality after the United States and Israel bombed Iran on February 28.

On March 2, Iran state-run media issued a statement: “The strait (of Hormuz) is closed. If anyone tries to pass, the heroes of the Revolutionary Guards and the regular navy will set those ships ablaze.”

With a fifth of all oil consumed globally passing through the Strait of Hormuz, the closing had an immediate effect. Oil and gasoline prices crept higher as peace talks failed to end the conflict. By May, the average price of a gallon of regular gas was 50 percent higher than before the war in Iran began.