Gas Prices in 1981

The average price rose 11.2% in 1981, to $1.37 a gallon, the highest annual average before 2000 in this record. After inflation it rose 0.7%, to $4.85 in 2025 dollars. That remained the highest inflation-adjusted annual average in the record until 2008.

On January 28, 1981, President Reagan signed Executive Order 12287, which ended federal price and allocation controls on crude oil and refined products immediately, eight months before the September 1981 date set by the phased decontrol plan. From then on, domestic crude and gasoline prices were set by the market.

Demand was weakening. The Federal Reserve’s high interest rates, which reached a peak federal funds rate of 19 percent in 1981, contributed to a recession that began in July 1981 and lasted until November 1982, according to the National Bureau of Economic Research. Higher prices since 1979 had also reduced fuel use and encouraged new production outside OPEC. The 1981 average marks the top of the price cycle that began in 1979; prices fell in each of the next three years.

Only three years in the record cost more than 1981 after inflation: 2008, 2011 and 2012. In 2025 dollars, 1981 averaged $4.85, against a peak of $5.08 in 2012. At the pump, by contrast, its $1.37 ranks only 26th-highest, because every year from 2003 onward carried a larger dollar figure.

Twenty years later the pump price had barely moved. The 2001 average of $1.42 was 3.8% above 1981, while its value in constant dollars was 46.7% lower. A price that looked almost unchanged on the station sign had lost close to half of its real cost. Ten years after 1981 the decline was already clear in both measures, with the 1991 average down 18.4% in current dollars.

Kansas had the lowest state average in 1981, $1.26, followed by Missouri and Colorado. Hawaii, at $1.56, was 19.1¢ above the national figure and ahead of Mississippi, the second most expensive state at $1.46; Alaska and Nevada came third and fourth. Nationally, the ten years from 1971 had seen the pump price rise 277.3%, nearly quadrupling, and the real price 68.0%.