In the early 1930s, an American motorist could pull up to the pump in a Ford Model T Speedster running on fumes, and for little more than a dollar drive away with a full tank. Today, the same amount of gasoline costs about $25.
Inflation is the primary reason for the increase in gas prices over time. However, while inflation affects the cost of all goods and services, the price of gasoline is subject to a number of additional market forces — and it can be uniquely volatile.
The average cost of a gallon of gas in the United States is the product of a number of interrelated global market forces. Foreign and domestic oil production, consumption, projected demand, financial markets, refining capacity, supply chain disruptions, transportation costs, futures speculation, and the value of the U.S. dollar all affect the price of gasoline.
Seemingly unrelated geopolitical and economic events can also influence the price of crude oil, which largely determines the price of a gallon of gas. For example, the cost of a barrel of oil more than doubled in the early 1970s, when oil-exporting Arab states imposed an embargo to retaliate against the United States for lending military aid to Israel. Similarly, the price of crude oil hit an all time high of over $160 per barrel during the 2008 global financial crisis. Today, crude oil prices are around $68 a barrel.
Adjusting the price of gasoline in the United States for inflation highlights just how much motorists actually pay for a gallon of gas. The average cost of a gallon in 2016 was just $2.14, well below the inflation-adjusted all-time high of $3.86 in 2012.
Similarly, though gas stations nationwide sold gas by the gallon for less than a quarter through much of the first half of the 20th century, accounting for inflation, it was not until the 1990s that real gas prices hit an all-time low.
24/7 Wall St. reviewed data from the U.S. Energy Information Administration to determine the average cost of a gallon of gas every year since 1929. We also reviewed the price of a barrel of oil each year, average daily U.S. oil production, and gasoline consumption. Annual data on total gasoline consumption and per capita consumption is only available from 1945 through the present.