Americans could soon pay more than $2 a gallon for gasoline for the first time in 2016, according to data from the American Automobile Association (AAA).
AAA reported the average gasoline price was $1.98 per gallon Monday. In 2015, the average price of gasoline price was $2.40 per gallon — despite the price spike, gasoline remains cheap by historical standards.
Consumers in 45 states and Washington, D.C. are paying more at the pump than they did a week ago. AAA reports gas prices tend to reach the highest levels of the year in the spring before the summer driving season.
Cheap gas is due to the cheap oil and natural gas-fired electricity provided by hydraulic fracturing, or fracking, and horizontal drilling. American oil production increased 75 percent over the last seven years. U.S. energy prices haven fallen by 41 percent over the course of 2015 due to the oil glut, according to the Energy Information Administration (EIA). Other commodities fell in price as well, but not nearly as much as energy.
U.S. consumers spent $370 billion on gasoline in 2014, meaning that the 28 percent price drop in gas in 2015 saved Americans $102 billion. Analysis by the EIA estimates that the average American household likely saved $700 to $750 at the pump in 2015.
Most analysts agree that last year’s ultra-low gasoline prices were enormously beneficial to American households, which tend to use cash not spent on gasoline to save more or pay down debt. Other analysts claim that the extra money is spent on luxury goods, such as eating out at restaurants. Cheap gasoline, however, disproportionately helps poorer families and other lower-income groups because fuel costs eat up a larger share of their more limited earnings.
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