By Robert Eyler ECON 101 What’s that got to do with the price of gas? T he oil shocks of the 1970s altered the way economists perceive the economic significance of oil. I recall being in my mom’s car, waiting in line at the gas station. The United States had become a net importer of oil (a phenomenon that recently reversed, though whether that is permanent How global movements affect what we pay at the pump
The history since 1990 has seen peaks and valleys based on a range of issues; we can likely expect to see this again, particularly concerning unemployment. We should expect a short-term impact if peace between Israel and Iran (and now the U.S.) remains elusive. In the medium term, markets may incorporate a risk premium into pricing that offsets the cost
remains to be seen). This net importer status created risk exposure for the American economy, and oil became a political weapon. A contraction of oil supply in 1979 created what, at the time, was known as worldwide “stagflation”; unemployment and inflation rose simultaneously, with the 1979 oil shock being one contributing factor (not the only reason). Volumes have been written on this subject. Gas prices are a persistent concern for households, whether perceived or real. For many local businesses, budget-conscious households and logistics and transportation companies, any sudden increase in gas prices is a shock. There was some hope that the Middle East conflict around Gaza would not expand,
of future volatility, thereby generating more revenue in the present. Changing oil prices are a key force in changing gas-pump prices (see the final graphic), not the only variable. However, barrel prices are logically a place where volatility begins a process of rising concern and possible change in many aspects of our economic lives. California, based on its efforts to improve air quality through regulation, taxation and incentives, has seen a reduction in refining within its borders and has become more reliant on fuel from outside the state. Consumers in California and the North Bay face relatively higher gas prices compared to other U.S. regions. This is a regressive
linked or not to the tragedy of Oct. 7, 2023, in Israel. In June 2025, the United States added to a recent escalation in the Middle East that suddenly broke out between Israel and Iran. Concerns over the movement of approximately one-quarter (probably more) of the global oil supply emerged quickly. From an economic viewpoint, inflation and its regressive effects on the cost of living may be exacerbated. One risk of escalation is a change in global petroleum markets and their potential impact on the worldwide economy. Change begins with barrel prices globally. West Texas Intermediate (WTI) crude oil prices are “barrel” (think 42-gallon drums) prices on the wholesale market.
West Texas Intermediate (WTI) Crude Barrel Prices.
Gasoline Prices, Index, 1984
18 NorthBaybiz
August 2025
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