It’s been sort of a national pastime to complain about high prices in the last few years. That often includes high gas prices. Remember, they hit $5 a gallon on average in 2022, peaked the next year right around $4 and haven’t fallen as low as pre-pandemic prices since then.

Things have been getting quite a bit better in the past year, however. The U.S. Energy Information Administration recently crunched the numbers and reports that pump prices on average were 21 cents lower per gallon in 2024 than they were in 2023. The EIA says that’s partly a reflection of lower and more stable oil prices recently — both the global benchmark Brent Crude and the North American benchmark West Texas Intermediate. All that moderation in oil and gas inflation makes a difference.

You might be forgiven for discounting the importance of energy prices in driving inflation. In fact, even the terms economists use suggest that energy can be ignored because it’s volatile.  

But that’s a mistake, cautioned Jay Hatfield at Infrastructure Capital Advisors: “Oil is critical — not just to headline inflation, but even core inflation, which excludes oil prices. Rising oil prices feed through to all prices.”

It impacts manufacturers that use oil to make stuff and service businesses, said Hatfield. “Even a restaurant has substantial energy costs” — from transporting ingredients to cooking the food.

We saw this during the pandemic, when global oil prices spiked after Russia invaded Ukraine, according to Joe Brusuelas at consulting firm RSM.

“An inflation rate that probably would have leveled out between 6% and 7% ended up between 9% and 10%,” he said.

But now, things are very different, per Stephen Schork, publisher of the Schork Report on the energy industry. “It’s been a very stable market for the past year and a half, with prices more or less in the $70 range, plus or minus $10.”

The main reason, in spite of wars in Ukraine and the Middle East disrupting supplies? “Globally, we have a surplus of oil,” Brusuelas said. “There’s too much supply sloshing around for the first time in many years.”

The U.S. has ramped up production while weak global growth is keeping demand low. There are risks going forward though, Hatfield noted.

“The Trump administration has historically been very tough on Iran, so they’re likely to try to constrain their exports,” he said.

All-out war in the Middle East would spell big trouble too, added Brusuelas. “We would have a global oil crisis that could put at risk the current business expansion and result in much higher inflation.”

But for now, “we have kind of a Goldilocks market, where the producer is making money,” Schork said. “The consumer is not getting banged, as it were, at the pump.”

The average price of gas right now is at $3.06 a gallon — a penny less than this time last year.