Understanding Why Gas Prices Spike Again: A 2023 Reality Check

The recent surge in fuel costs reflects deeper supply-demand dynamics that consumers need to understand. With crude oil trading around $81 per barrel according to West Texas Intermediate benchmarks, gas stations across America are charging premium prices—and the question of why do gas prices go up remains top-of-mind for drivers everywhere.

The Supply Story Behind Rising Pump Prices

The core driver of why do gas prices go up traces back to constrained global oil supply. OPEC+ production cuts announced in April, followed by Saudi Arabia’s additional reduction that took effect last month (effective through September), have significantly tightened oil availability. According to the International Energy Agency, world oil demand has scaled record highs, fueled by robust summer air travel, increased power generation needs, and accelerating Chinese petrochemical activity. This collision of robust demand and restricted supply creates the perfect environment for higher crude prices—which directly feeds into pump prices.

The math is straightforward: gas prices typically shift about 25 cents for every $10 swing in oil barrel prices. Since late June, crude has climbed more than 20%, translating directly to consumer pain at the pump. The national average now sits at $3.88, up 31 cents in just one month, with more than a dozen states exceeding $4 per gallon.

Regional Disparities Expose Multiple Pressure Points

Beyond simple supply constraints, regional factors amplify the pain. Unexpected refinery maintenance at a major Midwest facility has created localized pressure—Illinois drivers face averages of $4.18, compared to $3.85 a month prior. West Coast states tell an even starker story: Washington and California both exceed $5 per gallon (up from $4.94 and $4.91 respectively), while Oregon sits at $4.70 and Nevada at $4.42. Nationally, more than 10% of gas stations now charge above $5.

Earlier-than-expected maintenance shutdowns and extreme heat disruptions to refinery operations have compounded the situation, though AAA notes these weather-related issues have largely subsided. Still, hurricane season through September presents ongoing weather risks.

When Will Relief Arrive?

Expert forecasts suggest moderation ahead, though it won’t come quickly. Sean Snaith from the University of Central Florida’s Institute for Economic Forecasting expects declines as the summer driving season winds down post-Labor Day. Goldman Sachs projects a national average of $3.60 through 2024, with October-December averaging around $3.40 as temperatures cool.

However, a critical “wildcard” remains: additional OPEC+ supply restrictions could extend elevated prices. James Williams, an energy economist at WTRG Economics, sounds a cautious note: relief may arrive, but won’t be dramatic. Global oil demand growth is expected to slow as post-pandemic recovery matures, which should ease pressure over time.

The reality is nuanced. Seasonal decline typically occurs in fall, but isn’t guaranteed. Driving activity should drop after Labor Day, reducing fuel demand pressure. Yet with oil supply fundamentally constrained and demand historically resilient, Americans may need to accept higher baseline gas prices as a new normal rather than awaiting dramatic relief.