In the first week of May 2020, gas prices fell below $1.80, nearly the lowest in history when adjusted for inflation. By the second week of June 2022, they peaked above $5 — a record high.
It’s no secret why the price per gallon bottomed out in 2020. The pandemic turned the world’s highways into ghost roads, airports went dark and oil-thirsty factories closed their doors. The result was an unprecedented drop in demand.
But what happened in 2022 that sent gas prices from $3.28 in January to $5 in June and then back to $3.65 today? Let’s check it out as part of our Year in Review.
It All Started When the World Got Moving Again in 2021
Gas prices are tied to oil prices, and the pandemic simultaneously disrupted the world’s oil supply chains and choked off demand. The result was a wash.
“This kept gasoline and oil prices low as neither supply nor demand outpaced each other,” said Luke Williams, a finance expert with ExpertInsuranceReviews.com. “As the nation emerged from the pandemic, demand for gasoline rose as more consumers started traveling again.”
That was in the early spring of 2021, and as roads, skies and factories came back to life, the price per gallon jumped from $2.41 in February to $2.90 in May to $3.17 in August to $3.35 in December.
By the time the ball dropped on New Year’s Eve, the post-pandemic demand surge had already sent the price per gallon on an upward trajectory heading into 2022.
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In February, a Global Energy Giant Went to War
The U.S. produces more oil than any country on Earth. The world’s second-largest oil-producing country is Russia, and on Feb. 24, Russia upended the global status quo by invading neighboring Ukraine.
The world expressed its outrage by hitting Russia where it hurt the most — in its energy exports.
“Russia’s invasion of Ukraine prompted economic sanctions from all over the world,” said Williams. “Given that Russia is one of the world’s top fuel suppliers, such sanctions restricted the global supply of oil, raising prices even more as a result.”
The impact was immediate.
Russia launched its attack at the end of February when the average price per gallon was $3.61. A month later in the last week of March, it was $4.23, then $4.60 by the end of May en route to $5 in June.
A String of Incidents Made High Gas Prices Feel Inevitable
In 2021, President Biden put the final nail in the coffin of Keystone XL, a proposed 1,200-mile, $9 billion pipeline that would have shuttled 830,000 barrels of oil sands crude from Alberta, Canada, to Nebraska. Biden revoked a key permit, canceling the project for good after 12 years of legal wrangling between TC Energy and U.S. landowners, Native American tribes and environmentalists.
The outcome had no impact on gas prices, but Keystone proponents circulated misinformation to the contrary and the general public came to believe that the cost of fuel would rise because the pipeline was canceled.
Around the same time, hackers temporarily shut down the Colonial Pipeline in the biggest cyberattack on critical infrastructure in American history. That, too, was accompanied by doomsday media coverage that warned consumers to brace for higher gas prices.
A few months later, Russia invaded Ukraine and the public came to accept that record-high gas prices were inevitable in the near future.
Consumers Expected High Gas Prices — and Big Oil Didn’t Disappoint
While there were some legitimate issues with production and supply, it’s now clear that the oil industry used the public’s pessimistic expectations and the cover of general inflation to keep prices artificially high.
Shell, Exxon, Chevron, BP and TotalEnergies announced record profits of more than $50 billion in both the second and third quarters of 2022 — more than double the profits of a typical quarter. Their record haul directly coincided with the time that gas prices peaked at their highest point.
Big energy wasn’t the only industry that fleeced consumers under the guise of inflation in 2022, but no other industry’s price gouging was as egregious.
“Oil companies have been some of the top culprits of this practice,” said Collin Plume, a 20-year financial services industry veteran and CEO of Noble Gold Investments. “The Biden administration is threatening to impose a windfall tax on big oil if they don’t use their recent gains to increase production and lower prices at the pump. With a now divided Congress, it remains to be seen if such policies could pass.”
Expect Prices To Remain in the Mid-$3 Range Next Year
After peaking in June, the average price per gallon fell every single day for nearly two months before settling under $4 in mid-August. The decrease coincided with a global drop in the price of crude oil, which was welcome news for consumers and the economy as a whole.
High gas prices can drive inflation more than any other commodity because just about everything travels by truck at one point or another, and sellers have to compensate for the increased cost of shipping. When gas prices rise, everything from laptops to lettuce gets more expensive right along with it.
As of late November, the average nationwide price per gallon is $3.62, and you shouldn’t expect things to change too much in the new year. The Energy Information Administration predicts the average price per gallon will be $3.57 in 2023 compared to $4.05 in 2022.
Of course, you should keep in mind that the EIA’s projections are just one war or pandemic away from becoming wishful thinking.
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This article originally appeared on GOBankingRates.com: Gas Prices in 2022: All the Changes That Impacted Americans’ Finances This Year