Jan 11, 2022
When gasoline prices jumped in the United States in 2021, it was taken as a sign of runaway inflation- and a return to the bad old days of the 1970s. There is certainly some support for that view: According to data compiled by the Energy Information Administration, regular-grade unleaded gasoline averaged $2.97 per gallon over the first 10 months of 2021, and in October 2021 it was a whopping $3.38 per gallon. Considering that the same grade of gas averaged less than $2.00 a gallon in the spring of 2020, that could feel like the start of an out-of-control cost spiral.
It would be premature to jump to that conclusion, however. For one thing, the May 2020 prices were depressed by the widespread shutdown of economic activity at the beginning of the COVID-19 pandemic. More importantly, though, while the nominal average price of gas in the United States is high, adjusting the price for inflation tells a different story. Compared to prices from 10 years ago, gas is pretty cheap, though not as much as it was in the 1990s.
The graphs explain everything.