Why Are Gas Prices So High?

“Ugh . . . why are gas prices so high?” you yell at the sky as you cough up $70 to fill ‘er up.

Just when we got a little comfortable with those numbers dropping, boom—we’ve got another spike. Thankfully we aren’t back at that all-time record high when the average price of gas hit $5.01 a gallon on June 14, 2022.¹ But we were around $3.50 a gallon in the summer, and we’re now at $3.83.² Great. 

Hey, before you toss your car keys into the trash and start biking everywhere (unless you want to), we’ve got some tips to help you feel less pain at the pump. But first, let’s dig into the big question on everyone’s mind: Why is gas so expensive these days?

Why Are Gas Prices So High?

If you guessed a cocktail of inflation, the Russia-Ukraine war, crude oil prices, travel and more, you win. Because the answer to the age-old question, “Why are gas prices so high?” isn’t simple. A lot of factors impact why gas prices are so high. Let’s dig into all the stuff coming into play here one by one.

Inflation

First up, let’s talk about inflation, which is currently sitting at 3.7% over the previous 12 months. Gasoline was recently the biggest monthly spike, rising 10.6% from July to August!³ 

But listen, if you look at year over year costs, gasoline is still down 3.3% from last year.⁴ So is inflation bumping up the price at the pump since summer? Yes. But are we in as tight a spot as we were in 2022? Nope.

And, again, inflation is a big part of high gas prices, but not the whole picture.

Russia-Ukraine War

Let’s be clear here again: Gas prices were already going up before Russia invaded Ukraine. But the war between Russia and Ukraine definitely added to the mix.

On March 8, 2022, the average price for a regular gallon of gas climbed to an all-time high (back then) of $4.17, leaving the old record from 2008 in the dust.⁵ Gas prices jumped 10 cents overnight and more than 50 cents from the week before!⁶ And we all felt it.

On that same day, President Biden signed an executive order to ban the import of Russian oil, natural gas and coal to the U.S.⁷ Why does that matter? Well, because Russia is one of the biggest oil exporters in the world. It’s basically just a giant gas station (minus the day-old hot dogs).

Remember, gas prices eventually went on a long, crazy streak of record highs, topping out at $5.01 in the summer of 2022.⁸ Following that record high, gas prices steadily fell, settling into the mid-$3 range this past summer. But yes, the Russian-Ukrainian war is still ongoing. And yes, gas prices are moving up again.⁹

Travel

If you follow gas price trends, they historically go down in the fall (when we’ve all finished up our beach trips) and again in winter (when we’ve traveled for the holidays to Grandma’s and back).

But instead of dropping right after summer like the norm, this year there was that 10.6% increase just as school was getting back in session.

How will that affect holiday travel? Back in March of 2023, when prices were hanging in that $3.50 range, 75% of Americans said they were either “really excited” or “happy” to travel this year.¹⁰ Time will tell if that enthusiasm holds as gas prices rise.

Crude Oil Prices

Trying to figure out why gas prices are so high doesn’t stop there. Prices at the pump are impacted by the cost of crude oil going up too. Like we said before, Russia is a big-time exporter of oil, and the war made oil prices spike to over $120 a barrel. Right now, the cost of a barrel of crude oil is in the $91 range.¹¹

Plus, the amount of crude oil available has decreased, and there might not be enough to meet the demand for the rest of the year. So, the price of oil (and therefore of gas) could keep moving up.¹²

Oil Refineries

Oil refineries have been a partial cause for the higher gas prices in the past couple years. It’s one thing to have a low gas supply, but it’s another thing to have low capacity to refine the gasoline. We saw that hit hard in 2022, when gas inventories were at their lowest seasonal level since 2019.¹³

Part of that was because of President Biden’s focus on getting the country away from using gas-powered vehicles. He stopped work on the Keystone XL oil pipeline shortly after he took office.¹⁴ So gas companies had little incentive to invest massive amounts of money into building new refineries because they felt like they were being pushed out of business by clean energy laws.

But wait. There’s more to this story. Because 2023 brought a higher demand for gas, refineries started working at a fuller capacity to meet that demand. And now there are outages and maintenance issues from that push in production, which is another reason for the current lower fuel supply and higher fuel prices.¹⁵

Israel-Hamas War

Oil prices rose some (just 3%) after Israel was rocked by a surprise terror attack in early October. But as of right now, industry experts don’t expect this to cause a huge impact on the cost of oil or gas.¹⁶

Here’s the thing: If you’re worried about gas prices right now, it’s probably because any increase brings back memories of when things became extremely high—and that naturally makes you wonder if it’ll happen again.

In perspective with the hardships we just mentioned in other countries, the current increase at the pump isn’t the worst thing. And to add even more perspective—and hope—though some experts think the price will stay higher through the end of the year, they expect a “slow and unsteady” drop in prices overall.¹⁷

Still, when you’re adding it all up in your budget, you do feel the change right now. And we’ll share gas-saving tips in a minute, but let’s run through the government’s response to the higher gas prices first.

What Has the Government Done to Lower Gas Prices?

Good question. Let’s walk through a quick history lesson on what the government has done to help with the high gas prices over the past couple years.

Gas Stimulus Checks

You may remember the chatter about gas stimulus checks. Democrats talked about something called the Gas Rebate Act of 2022—a legislation that would give a $100 monthly rebate (and $100 for each dependent) to help Americans pay the higher gas prices.¹⁸ Several states did get some form of stimulus check or rebate payment based on their tax filing status. But it didn’t run nationwide.

Emergency Oil Reserve

Back in November 2021, President Biden told the Department of Energy to release 50 million barrels of oil from the Strategic Petroleum Reserve (the U.S. emergency stash of underground gasoline), but it didn’t do much to help gas prices ease up.¹⁹ 

Fast-forward to the end of March 2022 and Biden announced he would release 1 million barrels per day for the next six months from the Strategic Petroleum Reserve.²⁰ The hopes were that this would soften that crazy price surge, but it didn’t really make a huge difference.

Looks like it’s once again up to what we do in our houses and not what they’re doing in the White House. So, what do we do? Let’s talk about it.

How to Save Money on Gas (Despite High Prices)

Do higher gas prices stink? Yep, they sure do. But guess what? We’ve been in a worse spot with these prices before—and we can make it through this!

How?

Well, you’ll have to adjust some things in your budget and be intentional with ways to save money on gas. Start with these five tips to help:

1. Join gas rewards and cash-back programs.

You can sign up for gas rewards programs at places you already shop, like Kroger and Costco (just make sure they’re free rewards you’re signing up for and not credit cards). And don’t forget to check out cash-back apps like GetUpside to score some extra cash in your pocket every time you fill up at the pump.

2. Use apps to track the cheapest gas prices.

Speaking of apps, check out GasBuddy or Waze—or Peter Strohbusch suggests using the Upside app in THE Ramsey Baby Steps Community on Facebook. Each of these will help you find the cheapest gas prices in your area without wasting gas as you drive around search for it.

3. Make one trip.

Have a bunch of errands to run this week? Knock them all out in one trip instead of making eight different trips to the store during the week. It’ll save your sanity and your gas tank.

4. Carpool.

Okay, carpooling gets a bad rap sometimes, but hear us out here. 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 transportation too.

And having someone else drive you to work a day or two a week is a nice break. It’s kind of like having a chauffeur (without the black suit and hat—unless that’s their style).

5. Adjust your budget.

Here’s the thing: With gas prices going up again, you’ll have to move some things around in your budget to make it all work. All you have to do is cut back in a few other budget lines to beef up your gas budget line.

That might mean you start packing your lunch for work or ditch all but one TV streaming service. Do what it takes to get your budget in a good spot.

By the way, our free budgeting app, EveryDollar, makes it easy to create—and stick to—a monthly budget. You’ll easily adjust numbers on the fly and you can put all that saved money from carpooling and brown bagging your lunch to work. For you.

And remember—you can’t control rising gas prices, but you can totally control your overall spending. Make a plan (aka budget) for your money and have confidence, no matter the ups and downs.