Key insights
- While nominal gas prices may approach record highs due to potential geopolitical events (Iran conflict, Strait of Hormuz closure), inflation-adjusted prices are less burdensome than in 2008. This suggests the economy's resilience to fuel costs is higher than in past crises, potentially mitigating recessionary impacts. However, rising fuel costs remain a significant headwind for consumer budgets and the broader economy.
%3Amax_bytes(150000)%3Astrip_icc()%3Aformat(webp)%2FGettyImages-2275617785-47c320dc0b524bbeaa36dcb8eec36863.jpg&w=3840&q=75)
Get personalized, AI-powered answers built on 27+ years of trusted expertise.
Gasoline may reach a record high this summer, but that doesn't mean it's taking the biggest bite out of your budget that it ever has.
If the Iran war isn't settled by mid-summer and the Strait of Hormuz stays closed, the resulting oil shock could send the national average price for a gallon of unleaded gas above $5.03, according to Patrick DeHaan, head of petroleum analysis at GasBuddy.1 That would nudge the price above the record set in 2022, when the Ukraine conflict sent prices through the roof. The current national average stands at $4.55, according to GasBuddy.
However, if you adjust for inflation, fuel prices are actually much easier for household budgets today to absorb than during the energy crisis of 2008, based on data from the Bureau of Labor Statistics, which tracks inflation by measuring prices for thousands of things people buy.
Inflation adjustment sheds light on why the economy has been more resilient against high gas prices today than it was in the early 2000s, when soaring fuel costs contributed to the onset of the Great Recession.
Making gasoline prices proportional to the resulting Consumer Price Index shows how expensive gas is relative to everything else, and to incomes, which have risen faster than inflation over the decades. This gives some idea of how much of your buying power is being taken up by gasoline.
Relative to inflation, gasoline was its most expensive ever in June 2008. The 2022 spike in prices pushed the average to a nominal record high, but still well-below the 2008 peak after adjusting for inflation.
(The cause of today's oil price surge is obvious, while the one in 2008 is a bit murkier and is debated by economists, and possibly was due to a speculative bubble in financial markets.)2
Still, the rising cost of fuel is a major headache for household budgets as well as the broader economy, and is part of a widespread increase of the cost of living since the pandemic that has plunged consumer sentiment about the economy to its lowest in at least 74 years.
Get personalized, AI-powered answers built on 27+ years of trusted expertise.