Gas prices are often very volatile with swings in what Americans pay at the pump from month to month. The average price for a gallon of gasoline was $3.459 in December 2022, marking decreases of 12.6% from $3.958 in November and 1.3% from $3.505 in December 2021.
In the 2021 calendar year, the average price of gas advanced to $3.133 per gallon from the 2020 average of $2.242, representing a 39.7% increase.
Pricing for gasoline is a major category used by U.S. Labor Department’s Bureau of Labor Statistics (BLS) in calculating inflation but their volatility is also why they are excluded when the agency calculates core inflation rates.
The chart above and table below shows average annual prices of gasoline and those prices based on inflation in 2021 dollars. Specifically, they offer insights into how prices at the pump have changed over the years and how those prices compare after they have been adjusted for inflation.
Inflation Adjusted Gasoline Prices (1978-2021)
Category: Gasoline (All types, Per gallon)
|Year||Average Gasoline Prices by Year*||Average Annual CPI for Gasoline**||Gas Prices Adjusted for Inflation (In 2021 Dollars)|
*Data Source: U.S. Bureau of Labor Statistics: 12-Month Average Gasoline, all types, per gallon/3.785 liters in U.S. city average, average price, not seasonally adjusted. CPI Average Price Data.
**Data Source: U.S. Bureau of Labor Statistics: 12-Month Average Gasoline (all types) in U.S. city average, all urban consumers, not seasonally adjusted. CPI-All Urban Consumers.
***According to the U.S. Bureau of Labor Statistics, the gasoline (all types) index is composed of three grades of gasoline:
- Regular unleaded gasoline: Gasoline having an octane rating greater than or equal to 85 and less than 88.
- Midgrade unleaded gasoline: Gasoline having an octane rating greater than or equal to 88 and less than or equal to 90.
- Premium unleaded gasoline: Gasoline having an octane rating greater than 90.
How to Adjust Gasoline Prices for Inflation
In calculating gasoline prices to adjust for inflation, we’ll use an example that shows how to adjust them from 1978 to 2021. First, consider these facts which are shown in the table above:
- The average price for gasoline in 1978 was $0.652 per gallon.
- The annual average CPI for Gasoline (all types) in 1978 was 51.900.
- The annual average CPI for Gasoline (all types) in 2021 was 264.017.
The following formula shows how to adjust gasoline for inflation:
1978 Gas Price x (2021 CPI for Gas / 1978 CPI for Gas) = Adjusted Gas Price in 2021 Dollars
Using the actual numbers:
$0.652 x (264.017/51.900) = $3.32