3 Approaches to the Increasing Gas Prices in the US

A hand pumping gas into a car at a gas station to signify the increasing gas prices

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Why is there so much anxiety around increasing gas prices in the US? Is the anxiety founded? Why do gas prices fluctuate?

Gas prices are always a point of contention among Americans. Despite American gas prices being significantly lower than European prices, politicians on all sides continuously draw attention to them.

Keep reading to learn about the different approaches to gas price anxiety.

Anxiety Over US Gas Prices

As of 2024, US gas prices ranked in the bottom half of countries globally. In mid-November, the average US gas price was $3.08 per gallon—an 8.4% decrease from $3.37 a year earlier. The outlook is for prices to continue falling, with GasBuddy projecting an average of $3.38 per gallon for 2024.

However, gas prices in the US have increased significantly since 2021, and they remain higher than historical averages. Prices fluctuated throughout 2023 and 2024. The average gas price per gallon in 2023 was $3.52, with monthly prices reaching their highest point at $3.84 in August and September of that year. In 2024, prices peaked at $3.61 per gallon in April before declining.

(Shortform note: Like oil, natural gas is a fossil fuel energy source. It’s composed primarily of methane and mined from rock formations like shale. Although the energy properties of this gas were known for centuries, natural gas wasn’t commercially available until the 18th century, and the first gas well in the US was dug in New York in 1821.)

Different Political Approaches to Gas Prices

The increasing gas prices at the pump are determined by many factors that political leaders can’t control. But because of consumer (and voter) sensitivity, politicians and policymakers across the ideological spectrum tout their approaches to maintaining stability or lowering gas prices.

1. The Left-Leaning Approach

This approach aims to provide targeted financial assistance to low-income households while maintaining incentives for reduced consumption. Key aspects include:

Offering income-based assistance: This solution recognizes that lower-income households often spend a higher percentage of their income on transportation costs, making them more vulnerable to price fluctuations. Income-based aid could be provided through tax credits or direct payments, similar to existing programs like the Earned Income Tax Credit.
Maintaining market prices: By not mitigating market prices, this approach could encourage the adoption of more fuel-efficient vehicles and alternative transportation methods.

2. The Right-Leaning Approach

This approach focuses on expanding drilling and exploration to reduce dependence on foreign oil and potentially lower prices. Key aspects include:

Expanding drilling permits: Proponents argue for increasing the number of permits for drilling on federal lands and offshore areas.
Easing regulations: This might include reducing the time required for environmental impact assessments, potentially accelerating the approval process for new drilling projects.
Energy independence: Increased domestic production could help buffer against global supply disruptions caused by geopolitical conflicts or natural disasters.

3. The Centrist Approach

This approach emphasizes technological advancements to reduce overall gasoline consumption. Key aspects include:

Research and development: Promoting innovation in fuel-efficient vehicles and alternative fuels. This could include funding for advanced battery technologies, which are crucial for improving the range and affordability of electric vehicles.
Fuel economy standards: Supporting and potentially strengthening fuel efficiency requirements for vehicles. The Corporate Average Fuel Economy (CAFE) standards have helped increase fuel efficiency by 35.4% from the 2002 to 2022 model years.
Consumer incentives: Providing tax credits or rebates for purchasing fuel-efficient or alternative fuel vehicles. These could be modeled after programs like the federal tax credit for electric vehicles.

(Shortform note: While some think that electric vehicles are the solution, studies claim that electric vehicles aren’t as environmentally friendly as advertised. A German study compared the carbon footprints of a Tesla Model 3, a Mercedes that runs on diesel, and a Mercedes that runs on natural gas. They found that the Tesla has the highest carbon footprint per kilometer of driving when taking the cars’ entire life cycle into account. The main reason for this is the carbon cost of the EV’s battery production and recycling.)

How the US Compares to Europe

In comparison with European countries, Americans generally enjoy lower prices at the pump. As of mid-November 2024, many European nations had significantly higher gas prices than the US:

Denmark: €1.92 per liter (approximately $7.84 per gallon)
Netherlands: €1.92 per liter (approximately $7.84 per gallon)
Germany: €1.66 per liter (approximately $6.78 per gallon)
France: €1.71 per liter (approximately $6.98 per gallon)
United Kingdom: €1.63 per liter (approximately $6.66 per gallon)

Why Fuel Prices Fluctuate

Many factors contribute to US gas price fluctuation, including:

Crude oil prices: Gasoline prices generally follow crude oil prices, which are influenced by global supply and demand dynamics.
Refinery operations: Issues with refinery capacity or maintenance can impact gasoline production and prices.
Gasoline specifications: Environmental regulations require different gasoline formulations for summer and winter, affecting production costs and seasonal pump prices.
Supply disruptions: Natural disasters or geopolitical tensions can disrupt the supply chain and cause price spikes.
Economic conditions: Overall economic health can influence demand for gasoline and, consequently, its price.
Political decisions: Taxes, regulations, and international relations can impact gas prices.

Additional factors affecting local pump prices include: