How Global Events Are Driving Gas Prices (And What It Means for Your Business)

Notice the peaks, the troughs, where it started, and where it is today. At the time of writing, the USD/Gal price is 2.1777. In a measurement we Australians can understand, that equals approximately $0.91 AUD per litre.

2018 - 2019: Relative Stability

Before the turbulence of the 2020s, global gas prices were relatively stable, fluctuating between $1.50 and $2.50 per gallon. This was largely due to a well-balanced supply and demand market, where oil production generally kept pace with consumption.

While there were minor seasonal fluctuations - such as increased demand in colder months and brief geopolitical tensions such as the US-China trade war, these had little lasting impact on overall price trends. As a result, Australian businesses could enjoy fairly predictable fuel and transport costs.

2020: COVID-19 Pandemic and Record Low Prices

When COVID hit, everything went down the drain. In fact, if we zoom into the graph, we can see almost the exact week that everyone realised COVID was about to shake the world to its core. From March the 2nd to March 16th, the price of gasoline was cut in half.

This staggering drop was the result of an unprecedented collapse in fuel demand. Global lockdowns brought travel, commuting, and industrial activity to a standstill.

With oil producers left scrambling, supply chains had no time to adjust to the sudden demand shock. Storage tanks filled up quickly, and in April 2020, US oil futures even briefly went negative - meaning suppliers were paying traders to take oil off their hands.

This was a double-edged sword for businesses. Lower fuel costs helped reduce operational expenses for those still operating, but supply chain chaos made actually doing business almost impossible.

2021: The Recovery Begins - Prices Surge

When the world finally did start to reopen in 2021, the economic rebound was swift. With factories restarting, airlines increasing flights, and consumers returning to pre-pandemic habits, fuel demand returned almost as quickly as it disappeared.

After effectively shutting up shop for a year - the fuel markets weren't ready for this increase in demand. The result? A sudden supply crunch that sent gas prices climbing past $2 per gallon by mid-2021. After a year of historically low prices, businesses were now facing the other side of the coin - higher fuel, freight, and energy costs driving up operating expenses.

2022: Russia-Ukraine War and the Energy Shock

If 2021 was the year of recovery, 2022 was the year of crisis. On February 24th, Russia invaded Ukraine, sending shockwaves through global energy markets. Almost overnight, gas prices spiked to $3.50 per gallon, and then to $4 per gallon a month later - hitting their highest level in over a decade. You can see the start of this jump in the graph below: