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Gas prices are frequently a hot topic. Some seasons can bring gas close to or above $5 a gallon, straining your wallet. What’s the outlook for 2023? How high will gas go? This year will likely alleviate last year’s peak supply chain pains. However, it can change in an instant. Read this guide to see what affects gas prices at your favorite convenience store.
How High Will Gas Go in 2023?
2022 was a painful year for the American consumer. Supply chain disruptions and other issues led to sky-high gas prices. The American Automobile Association (AAA) reports 2022 set a record with a national annual average of $3.96 per gallon. Numerous factors led to these prices, but experts foresee some help for drivers in 2023.
Gas prices are difficult to predict, but GasBuddy predicts prices will peak at a national average of $3.99 per gallon in June. By December, the mean price will drop to $3.17 per gallon. The signs point toward a typical year, with prices increasing in the summer and decreasing after Labor Day when many schools return for the fall semester. GasBuddy says American households will spend about $275 less on gas this year than in 2022.
What Factors Affect Gas Prices?
Unfortunately, gas prices can change on a dime. Well, as you know, it can vary by much more than a dime. Fuel costs are fragile and dependent on these five factors daily.
1. Supply and Demand
Supply and demand is a terrific way to contemplate how high gas will go. Gas prices come down to the simple economics of supply and demand. High supply and low demand lead to low prices. However, demand outpacing supply leads to high costs, as we’ve seen in the last few years. One way to understand the concept is to look at the seasons.
When do most Americans take their vacations? Holidays like Memorial Day, Independence Day, Father’s Day and Labor Day are terrific vacations because of the warm weather and special occasions. Many people travel these days, leading to higher demand and higher prices. On an average winter day, people don’t travel much outside of work and school, so the prices dip.
2. Crude Oil Prices
To get gasoline, you need to start with oil. Extracting oil from the ground gives you the base to make gas. In the refineries, companies take crude oil and use a three-step process to create fuel. It typically goes through distillation, conversion and treatment. Completion of the process gives you usable gasoline, whether high or low-octane. The refinery also uses oil for diesel, biodiesel and ethanol gas.
Crude oil prices are among the most direct factors in determining gas prices. The end of May 2022 saw the cost of an oil barrel reach over $117. Since then, prices have fallen for the most part, with a few spikes here and there. In April 2022, oil peaked at around $101 per barrel. In April 2023, crude oil will likely hover between $75 and $80 per barrel.
3. Refinery Costs
Refineries are crucial for creating gasoline, and they don’t come cheap. A fraction of the price requires paying for a refinery to give you the best gas possible. These factories play a critical role because one slip-up can make gasoline more expensive for a whole region or country.
For example, Suncor Energy in Colorado shut down for repairs in late 2022. The temporary closing led to a 51% increase in gas prices for the state. The supply chain for gasoline is complicated, and one broken link can wreck the entire chain.
4. International Conflict
The COVID-19 pandemic has had lasting effects on us as people and the global economy. It led to supply chain disruptions putting high prices on shelves. If that weren’t bad enough, insert a global conflict. Russia invaded Ukraine in early 2023, sending Europe, the U.S. and other countries into crises with energy and fuel.
Russia is one of the world’s largest oil producers, and the U.S. imported millions of barrels monthly from the country before the Ukraine invasion. Many countries, like the U.S., punished Russia for the war by halting most of our trade with them. Taking Russian oil out of the market made prices soar because we relied more on other sources. Another international conflict could quickly spike prices again.
5. Gas Taxes
This factor isn’t as volatile but impacts how high gas will go. The federal government and the 50 states have taxes on gas. Currently, the federal gas tax is 18.3 cents per gallon (CPG) for gasoline and 24.3 CPG for diesel. The federal government’s gasoline tax has remained the same since the 1990s, with no current plans to raise the tax. State gasoline taxes are more up for debate.
State gas taxes change yearly, and typically they go up. In 2023, Michigan’s gas tax increased by 5% to 28.6 CPG. States like Utah and California saw increases at the beginning of this year. Some states, like Georgia, opted to temporarily suspend their gas tax amid the supply chain and Russia issues of 2022.
How Can You Save Gas?
The prices at the pump have many Americans wondering how high gas will go. There’s not much you as an individual can do about the costs. If you can get everybody to stop buying gas for one day and decrease demand, be my guest. In the meantime, use some tricks to save gas on the road:
- Lighten the load: Some aspects directly affect your car’s fuel economy. For example, look at how heavy your load is when driving. Putting extra weight on your vehicle compromises your efficiency. Every 100 pounds added means a 1% reduction in your miles per gallon.
- Inflate the tires: Your tire pressure is critical for keeping the wheels on, but it’s also essential for fuel mileage. Keep the pounds per square inch (psi) at or slightly above the manufacturer’s recommendations. Proper inflation leads to a 1% to 3% increase in fuel efficiency.
- Get a hybrid: How high will gas go? If you have a hybrid or electric vehicle (EV), it won’t matter. In all seriousness, these options are the best ways to avoid the volatility of gas prices. Plus, you’ll do the environment a solid.
How High Will Gas Go? It Depends
The prices of eggs, chicken wings, coffee and more have been a pain in the you-know-what. Gasoline costs haven’t helped much, either. Many Americans sit and wonder how high gasoline will go. 2023 seems like it will provide relief compared to 2022. However, the prices are fragile and can spike instantly.