00:02When gas prices climb, we feel the difference in our wallets. But price spikes have a long
00:08history. Global events often hit drivers fast, while prices at the pump settle back over time.
00:14Here is the average price of a gallon of regular gasoline over the last 50 years. Let's first
00:20adjust for inflation and walk through the history of price swings beginning with the 1970s. In 1973,
00:28OPEC nations declared an embargo against the US and other countries that had supported Israel during
00:34the Yom Kippur War. The Nixon administration capped gas prices, forcing never-before-seen lines at the
00:41gas pump. However, it's the Iranian revolution that creates the first true spike in our chart.
00:47It brought about 7% of global oil supply offline and heightened tensions in several oil-producing
00:54states. It was more of a concern that, not just with Iran cutting off oil to the global market,
01:01but that others would as well. That the hostage crisis would explode into a regional conflict
01:08exactly like we're facing today. By early 1980, the price topped $5 per gallon in today's terms.
01:16But gasoline prices dropped the following year, as tensions subsided and oil production picked up.
01:21The rest of the 80s and 90s were marked by relative stability in oil markets and affordable gasoline
01:27prices, especially from 1986 onward. New oil producers outside of OPEC entered the global oil market and
01:38energy conservation efforts were fostered as a result of the oil price spikes. The highest gasoline price
01:46during this period was $3.38 per gallon in October of 1990, after Iraq's invasion of Kuwait. At the turn
01:55of the century, a new dynamic took hold, sending gasoline prices on an upward swing from the end of 2001
02:02through 2008. We saw a significant growth in the demand for oil, mostly coming from emerging Asia,
02:12China in particular, which outpaced supply, which was stagnant over that period.
02:20That demand reached new heights in 2008. The Summer Olympics in Beijing meant China was stockpiling supply.
02:28China knew that its atmosphere in Beijing and other cities, which would be hosting the Olympics,
02:34was very toxic to athletes. And so they arranged to shut down their coal-fired power plants and switch
02:40to fuel oil power plants. And they did this. But this required a huge amount of fuel. They bumped up
02:47demand
02:47by about 2 million barrels a day running up to the Olympics. And the market didn't quite see this in
02:54time. In July 2008, while oil jumped to $147 per barrel, the inflation-adjusted gasoline price in the
03:02U.S. hit $6.12 per gallon. A few months later, prices tumbled. The collapse of oil prices in 2008
03:11is
03:11indeed the direct result of the financial crisis. So there was a steep drop in oil consumption in
03:16anticipation of a major global recession. Gas prices fell to $2.62 in December 2008.
03:25But the dip was short-lived. The 2010s saw the longest sustained period of gas prices above $4 per
03:32gallon. Global oil demand continued to rise. And the decade brought a new set of world events that shook
03:39oil markets. It was actually a combination of robust demand from emerging markets in Asia together with
03:48a number of geopolitical tensions. First, some supply disruptions from the Arab Spring in 2011,
03:58further tensions with Iran in 2012, which kept prices elevated over a substantial period of time.
04:08At the same time, a new technique to drill for oil and gas, known as hydraulic fracturing or fracking,
04:14took off in the U.S. It made previously overlooked oil patches in places like Texas and North Dakota
04:20profitable, but only at higher global prices. The price of crude at $100 a barrel made most of these
04:29plays very economical. And they expanded. OPEC cut oil production in the first few years of the decade,
04:38which kept prices high. But the high price incentivized more production, both domestically and abroad.
04:45We say in the oil patch, the cure for high prices is high prices.
04:50In November 2014, declining prices accelerated when OPEC reversed course on oil production cuts.
04:58In the following years, U.S. gasoline prices stayed well below $4 per gallon.
05:03When COVID-19 lockdowns hit, gas prices dipped to their lowest point in 20 years,
05:10when adjusted for inflation. Oil briefly traded in the negative. That means storage facilities were full,
05:17as demand sputtered to a halt. And the companies holding the oil had to pay other companies to take
05:23it off their hands. U.S. shale drillers, they got heavily burned during COVID. A lot of shale companies
05:31went under. The companies that survived adapted. Cutting risk, slowing investment in new wells,
05:37and prioritizing shareholder returns, as the economy rebounded in 2021 and 2022. That also pushed prices higher.
05:47Then came Russia's invasion of Ukraine. The U.S. and European countries stopped importing Russian oil,
05:53and capped the price Russia could sell it for elsewhere.
05:56Europe and the U.S. forced Russia to find new export markets, and that led to a reshuffling of global
06:02oil flows.
06:03That reshuffling squeezed global oil supply and brought U.S. gasoline prices to $5.62 per gallon,
06:12the third highest in 50 years. That brings us to 2026, when Iran blocked the Strait of Hormuz,
06:20and Americans felt the effects. It is without a doubt the largest supply disruption in the history
06:26of global oil markets. About 20% of the world's oil typically flows through the strait. Some was
06:33redirected to pipelines, and releases from petroleum reserves blunted the impact slightly. But about 10% of
06:40the world's oil supply was stuck on the wrong side of the strait. The severity of this event is not
06:46fully
06:47reflected in prices yet. So oil supplies are much tighter than what the market price currently suggests.
06:56With each dollar spent per barrel, Baumeister says gasoline prices usually go up by 2.5 cents.
07:03The longer oil markets are disrupted, the higher that price can go.
07:07For Straight Arrow News, I'm Keaton Peters. For more on this story,
07:12download the Straight Arrow mobile app today, or go to san.com.
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