Gas is a big part of our daily lives. We drive to work, school, see friends, get groceries, etc. However, in that process, you may have also noticed that expense burning a hole in your pockets.
So, why are gas prices going up in 2023? Recently, it was announced that gas prices hit a 10-month high, which isn’t what anyone wants to hear.
This article will break it all down for you. We’ll cover this topic in 3 parts.
- Current factors that are leading to higher gas prices.
- Common signs that gas prices will go up.
- How you can save on gas when prices are high.
If you’re concerned about how you will budget for this increased expense and even want to prepare when there are signs of future gas price increases, you’ll want to stick around through this whole article to get all the answers.
Let’s get into it.
Part 1: Current Factors Increasing Gas Prices
First and foremost, what are the current factors leading to increased gas prices right now?
Essentially, these current gas price increases are a continuation of ongoing struggles across the world.
Things started to get bad when Russia invaded Ukraine in 2022. It marked a drastic cut in crude oil accessibility. Those struggles have been ongoing.
Recently, more crude oil supplies from Russia and Saudi Arabia have been cut.
Lower supplies of crude oil grow its demand, leading to your current-day increase in gas prices.
That’s the main issue right there. However, there are still a couple of other culprits that have had an influence lately, too.
Market-Wide Inflation
Ever since the beginning of the pandemic in late 2019 to early 2020, prices on just about everything have increased. From homes to gas to groceries, you name it. Prices have gone up.
The current gas price increases are another sign of continued market-wide inflation. It’s not only gas that’s seeing increased prices.
We’re seeing increased prices on foods like dairy products, produce, and flour.
The average prices of home listings continue to rise.
Electricity costs continue to go up. That not only affects your household bills but also how much it costs for manufacturing processes to produce many of your favorite or essential products you spend money on.
Parts for cars are becoming increasingly scarce. That means car repair expenses are rising, and the cost of buying a new vehicle is also significantly increasing.
Not to mention, we’re in a transitionary time where many companies are working to adjust to new employee wage needs in this time of inflating prices. So, some costs may feel like more of a burden because the market hasn’t balanced itself out yet.
It’s a tough time for the average American. That said, if you can hang tight and try to save where you can, things will balance out as they usually do. The vast majority of economic experts are confident about that.
Strategic Petroleum Reserve Levels Have Decreased
Another factor influencing gas prices is that our Strategic Petroleum Reserve (SPR) levels in the U.S. have decreased over time as we’ve faced these circumstances of reduced access to crude oil.
The SPR is an emergency crude oil supply. It’s designed to help balance out the market in times like these when worldwide crude oil supplies are disrupted. However, since we’re coming up on nearly 2 years since these problems began, that supply has steadily decreased over time as our U.S. economy has needed it.
Currently, we have about 350,000 barrels in crude oil reserves. That’s a marked decrease from the 630,000 barrels we had in reserve at the beginning of 2021.
Now, with the concerns of the lowered SPR, gas prices are rising. It’s a natural consequence occurring.
However, there is light at the end of the tunnel here.
The U.S. has been increasing production of crude oil locally in recent years. In fact, the U.S. now produces more crude oil than Saudi Arabia and Russia. 2023 is set to be a record year in oil production, and 2024 looks to be even stronger.
That’s good news for anyone looking for the gas prices to stabilize sooner rather than later.
Do We Need to Be Worried About These Rises in Gas Prices?
There is always worry about gas price increases. Some research has even correlated higher gas prices with recessions.
However, in this instance, most experts agree that there isn’t much need to be worried. There seem to be many preventative measures to avoid any major nationwide impact.
As mentioned, the U.S. ramping up crude oil production will help.
It’ll also benefit the average worker as wages (hopefully) continue to rise.
On top of all that, advancements in green and solar energy sources are helping out. As more businesses can convert to cleaner energy in production, less crude oil is needed. That means the prices of everyday products go down, and gas prices can decrease since there isn’t such a strain on the supply. It’s a good thing for everyone involved. Even the planet will benefit.
There’s even hope that more advancements in electric vehicles can come through that make them more accessible and beneficial for the average consumer in the coming years.
Part 2: Common Factors That Can Raise Gas Prices
Now, let’s briefly cover common reasons why gas prices go up. Not all of these factors will be affecting gas prices right now. That said, hopefully, this section can help you prepare for the future if it looks like prices will be going up.
This is not to say that you should go out and buy all the gas you can get your hands on if it looks like prices will go up, but simply have some contingency plans ready to prepare your budget or reduce usage.
For instance, you could prepare to carpool more often with some friends from work or reduce some other expenses in your life, like deciding to cook and eat at home more often.
National Factors That Raise Gas Prices
As mentioned earlier in this article, the primary reason why national gas prices will go up is due to increased crude oil expenses. Crude oil is essential to creating gasoline, so there’s a significant connection there.
Seasonal Factors
Seasonal factors can also increase gas prices. Particularly, you’ll often notice that prices are higher in the summer than in the winter. For one, most people are less active during cold winter months, meaning they’re driving less, and there’s less stress on crude oil supplies.
In addition, the increased heat during the summer affects what components can be used when producing gasoline since some cheaper substitutes can evaporate easily in the heat. There are regulations to avoid using those ingredients during summer, raising gas prices further since it’s more expensive to produce during that time.
Gasoline Inventories
The final national factor is gasoline or crude oil inventories. This covers aspects like the SPR that was mentioned earlier to provide extra crude oil in times of limited accessibility. If supplies get low from inventories or gas/oil available through imports, then prices rise.
On top of that, sometimes fear can play a factor here. If suppliers fear that the availability of gas/oil may be poor in upcoming months, they may increase prices due to the fear that they could otherwise run low.
Regional Factors That Increase Gas Prices
You may have also noticed that gas prices can be higher or lower in different regions. For instance, California is a state that often has much higher gas prices. So why is that?
Distance From Suppliers
Where the state is in comparison to the biggest suppliers in the U.S. can make a difference in price. Gas is difficult and costly to transport safely, so this is a significant cost factor.
Some of the top gas producers in the U.S. are:
- Texas – 24.6%
- Pennsylvania – 21.8%
- Louisiana – 9.9%
- West Virginia – 7.4%
- Oklahoma – 6.7%
You may notice that these states and those nearby will have lower gas prices, and those further away will see higher prices due to transportation expenses.
Natural Disasters
Weather-related disasters like hurricanes or tornadoes can make an impact. When one of these natural disasters is likely to happen near a refinery, it must be shut down.
The results of these disasters can even lead to longer maintenance periods or shutdowns when they’re severe.
Those effects cause disruptions in supply and distribution that will increase prices, especially in parts of the country that had their shipping and production pipelines disrupted by the disaster.
Local Availability/Retail Competition
Have you ever noticed that places with fewer gas stations have higher per-gallon prices? That’s because local availability and competition can be very impactful. More competition in the local market is actually better for your wallet.
Every gas supplier wants to get your business. And when the product isn’t any different from one place to another, the only real way they can compete is through slightly lower prices that will see a general downward trend.
Environmental Programs
Different states also have their own environmental programs that are enforced on gasoline that is produced and sold there.
About one-third of U.S. states have regulations requiring gas to be reformulated to decrease carbon monoxide, smog, and other toxic air pollutants. California is one of the most strict of these states, so their prices tend to be higher.
Part 3: How You Can Save on Gas When Prices Are High
Now that you know why gas prices go up, let’s break down how you can save when they’re high to alleviate some of the stress from your budget.
1. Avoid Premium Fuel for the Average Vehicle
While most car manufacturers will recommend premium fuel, it isn’t necessary for most consumer-grade cars. Go for the regular fuel, and it’ll save you some significant money at the pump.
2. Look for Rewards Programs
There are many types of gas-related rewards programs. Some gas stations like Shell will offer rewards programs so you can get a bit of money off on your tank of gas if you frequently fill up there.
Looking for an app that can help? Upside will help you find deals on gas in your area and even give you cash back from your spending.
Want a credit card that gives great rewards for spending at gas stations? The Wells Fargo Autograph Card is a great choice. It’ll give you 3 times the rewards on all your purchases at gas stations.
3. Drive for Fuel Efficiency
You can also save money on gas while driving. Try to avoid going over the speed limit. The faster you drive, the quicker you burn through your gas. Plus, it’ll help you avoid any costly speeding tickets. Also, avoid slamming on your breaks too hard, as that can burn through some gas when done repeatedly.
4. Maintain Your Car
Make sure you bring your car in for regular maintenance to ensure it stays running efficiently. When your tires are aired up, properly rotated, and oil is changed regularly, you’ll always be running at top fuel efficiency for your vehicle.
Gas Prices Are Rising, But All Hope Isn’t Lost
Yes, gas prices are going up. But there is still hope.
Advancements in fuel-efficient driving and efforts to produce more crude oil in the U.S. will help lower gas prices and decrease oil needs going into the future.
You can also make efforts on your own by looking for rewards programs, buying the right fuel, and maintaining your car for fuel efficiency.
Hopefully, you’ve learned a thing or two about gas prices. It’s an issue, but nothing you can’t tackle with the right financial goals in mind.
