How high are gasoline prices today, really?

Americans these days are intently focused on the price of gasoline. Understandably.

Gas prices were already rising after travel and commutes resumed following widespread restraints imposed early in the coronavirus pandemic. During the early months of the pandemic, gasoline prices cratered. When demand for gasoline began to increase again, it pushed the price at the pump higher. 

Then, Russia’s invasion of Ukraine threw another wrench into the global oil marketplace, as some countries imposed sanctions on Russian oil. As the market adjusted to reduced supply, prices went up again. 

"Gasoline prices are eye-catching and memorable," said Gary Burtless, an economist at the Brookings Institution. "Most of us car owners fill up our tanks regularly, and when we buy gas we seldom purchase anything else at the gas station. This makes the price even more memorable."

But how high are gas prices now compared to the past? This is a trickier question to answer than one might expect, because the most basic gas price data is not adjusted for other economic factors, including incomes, which have been rising over time. You also can’t simply adjust gas prices using the most common inflation measure — the consumer price index, or CPI — because gas prices are already factored into the CPI. This means that simply using an online CPI calculator to adjust gas prices produces a flawed number.

Here, we’ll try to put gas prices in context of history and American pocketbooks.

First, let’s look at the price at the pump without making any adjustments.

During the first week of March, the price rose to $4.10, according to the federal Energy Information Administration. (This is a national average; there is variation across regions and from gas station to gas station. Other sources of variation in a household’s gasoline costs are how many cars you own, how much you drive and how fuel-efficient your car is; literally, your mileage may vary.)

The government’s historical data goes back to 1992. During that period, the single-week high was about $4.11 a gallon in July 2008, while the low was 93 cents a gallon in 1999.

In other words, we have basically reached an all-time high for gasoline prices — and since the impact of Russia’s invasion of Ukraine has not been fully felt in the oil markets yet, that price is likely to rise further in the coming weeks.

Another way to look at it is that gas prices during the first week of March 2022 were more than 50% higher than the first week of March 2021. That’s several times faster than the increase of consumer prices generally over the same period, which was 7.9% in February.

However, it’s important to note that the agency’s gasoline prices are not adjusted for other economic factors. So we decided to calculate how much a typical gasoline purchase costs as a percentage of income. This shows the burden of higher gas prices for the average household.

First, we calculated the average cost of 10 gallons of gas, which is close to the average weekly purchase, according to GasBuddy.com. Then we used data for per capita personal disposable income from the federal Bureau of Economic Analysis. This figure reflects not just salaries and wages but also government payments, then adjusts that amount for taxes paid.

We divided this personal disposable income figure by 52, to approximate weekly income. Then we divided the cost of 10 gallons of gas by the weekly income figure to determine what percentage of weekly income was devoted to paying for a typical amount of gasoline on a weekly basis.

We found that the burden of a typical gasoline purchase rose from 2.1% of disposable income in 2020 to 2.8% in 2021. And using current price levels from March, the burden of paying for that gasoline purchase spiked further, to 3.9%. 

This is not an annual figure, so it’s not directly comparable, but it shows a clear and rapid growth in how burdensome gas purchases have become since the start of the year.

At the same time, however, today’s percentage is not unprecedentedly high. In fact, the burden remains below the prevailing levels for most of the time between 2006 to 2014. For eight of the nine full years during that period, a 10-gallon weekly purchase was more burdensome than it is today, peaking at 4.8% of disposable income in 2011. 

The reasons for high prices during this period included rising demand in developing nations, sluggish production, and political tensions in the Middle East.

"Many Americans may not recall how high gas prices were between 2008 and 2014," Burtless said.

How much higher would gas prices as a percentage of disposable income have to go to set a new record? That should happen roughly when gas prices hit $5.10 a gallon. That’s about a dollar higher than now. 

So the U.S. is not there yet, but depending on how much oil prices spike due to the invasion of Ukraine, it’s hardly inconceivable.