This April gas price report is based on data through March 2024. All insights provided are taken from the Gas Price Tracker which is updated monthly.

Direction in Prices So Far

Gas prices have generally trended downward since reaching a peak in June 2022. Although there were increases in September 2023 and March 2024, longer-term trends indicate a declining price index.

While prices are higher than they’ve been in the past few years, current rates are slightly lower than the average price from April 2011 through July 2014.

Since January 2022, gas prices have largely remained within the $3 to $4 range. While prices have eased somewhat, they have not significantly dropped as they did following the 2008 market crash or during the surge in U.S. oil production in 2014, which led to prices stabilizing in the $2 to $3 range. Generally, the gas price index follows an additive trend, indicating long-term growth. Periods of lower prices can occur due to extreme external factors, but the overall trend is upward. In the absence of major external influences, we might expect prices to stay at the current level for an extended period. However, prices on the West Coast typically exceed the national average.

This month, the national average has been the lowest since 2022. March has typically seen a price range in the $2 to $3 range, but exceeded this in 2022 and has yet to recover.

Could we be nearing a price ceiling?

Year-to-date, the annual average gas price is lower than it was in 2014. Although it is still early in the year, current prices are beginning to resemble those seen a decade ago. This suggests that despite the overall upward trend in gas prices, there might be a ceiling to which these prices can rise. Despite fluctuations, we could be nearing that limit. What this means in practical terms is that the gallon of gas you bought today, is in fact cheaper than when you bought it in 2014. The annual family income in 2014 was around $53K, today the national average is $77K, so while the price may be similar, with more dollars in your wallet the effect of the price is lessened.

Exploring the Long-Term Implications of a Gas Price Ceiling

A price ceiling in the gas market refers to the upper boundary beyond which prices are unlikely to rise under prevailing market conditions. Here’s what such a ceiling could mean over the long term:

• Price Stabilization: A consistent price ceiling could lead to stabilized gas prices, helping consumers and businesses with reliable budgeting and financial planning.
• Consumer Behavior: Recognizing a price ceiling might influence consumer decisions. Knowing that prices are unlikely to exceed a certain point could either sustain current consumption levels or delay the shift to alternative energies.
• Industry Investments: With a clear price limit, the oil and gas industry may scale back on investments in exploration and development, anticipating insufficient returns on these higher costs. This could also slow innovation in more efficient technologies.
• Regulatory Adjustments: Policymakers could respond to a price ceiling by modifying fuel taxes, environmental regulations, or shifting subsidies toward renewable energy to manage consumption effectively.
• Global Market Effects: Because the oil market is interconnected globally, a price ceiling in one area can influence international oil prices and economic relationships, affecting global demand and supply.

Economic Resilience: By preventing sudden spikes in energy costs, a price ceiling can help stabilize economies dependent on oil and shield consumers from market volatility, particularly benefiting lower-income groups.

Looking at the underlying trend in gas prices

When analyzing this price series, relying solely on overall trends might lead us to inaccurate assumptions due to the cumulative nature of the data. The accompanying chart illustrates changes in monthly variation over time. For instance, January (red) typically records the lowest prices, followed by March (green), then June (orange), with October (pink) prices slightly higher than June’s. This pattern indicates that without adjusting for the long-term upward trend, we might mistakenly interpret that prices continuously rise throughout the year. However, this overlooks the actual monthly fluctuations, where price changes are not merely a reflection of an overall increase, but also show distinct seasonal behaviors.

This box plot seems to also indicate that summer months have the highest gas prices, is that true?

One way to explore the seasonal pattern of the data is to take out this secular trend. We can do that by using a moving window average of the past 3 months to smooth out the data, more than this smooths the trends too much. Then by taking the average and subtracting it from our monthly value (the national average), we can effectively remove the additive nature of the data.

When we do this, we see that January is typically a higher price point, in relation to the rest of the year. Over time, generally, the price comes down. This means that while prices generally rise, they rise less over time.

Conclusion

We can anticipate several possible directions for future pricing:

• Continued Seasonal Fluctuations: Historical data underscores consistent seasonal trends, with prices often peaking in the summer months and declining towards the end of the year. We should expect this pattern to persist, influenced by factors such as travel demand and refinery maintenance schedules.
• Impact of Long-Term Trends: While the long-term trend has shown an upward trajectory, the rate of increase appears to be slowing. This suggests a potential stabilization in prices at a higher baseline, influenced by both market dynamics and geopolitical factors.
• Effect of Market Ceilings: The concept of a price ceiling has been evident, with prices stabilizing within certain ranges during specific periods. Unless disrupted by significant external events—such as drastic changes in oil production policies or major geopolitical conflicts—gas prices may continue to oscillate around this established ceiling.

While the immediate future of gas prices appears to lean towards stability within known seasonal patterns and if anything, slightly increase over the year. Several factors could influence deviations from these trends.