Fuel Price Volatility in 2026: Impact on Mileage Reimbursement

Across the U.S., drivers are seeing prices climb at the pump again. In March 2026, the national average for regular gas hit $3.718 per gallon, according to AAA. 

Around the same time, the U.S. Energy Information Administration (EIA) raised its short-term outlook, projecting gas to average $3.58 per gallon in March, about 60 cents higher than earlier forecasts.

For companies with employees driving their own vehicles for work, this usually raises the same question:
Is our mileage reimbursement still covering the real cost of driving?

It should be. The programs that work best are built to track real driving costs over time, including changes in fuel prices.

And this isn’t new. We saw the same thing during the COVID fuel cycle, when prices dropped sharply and then spiked within months. 

That period made one thing clear: mileage reimbursement programs tied to real market data adapted, while one-size-fits-all approaches struggled to keep up.

Key Takeaways

• It’s not just high gas prices, it’s how much they swing that creates problems
• Flat allowances and fixed rates can fall out of sync when costs change quickly
• Gas gets the most attention, but it’s only one piece of what it actually costs to drive
• The IRS rate is a helpful benchmark, but it doesn’t always keep up with real-world changes
• Programs like FAVR or custom CPM do a better job keeping reimbursements fair over time
• Using fuel averages helps avoid constant ups and downs in payments
• The best programs adjust with real data, so you’re not constantly playing catch-up

Fuel Price Volatility Is Back, But It Is Not New

Fuel prices in 2026 aren’t just high, they’re unpredictable.

Annual forecasts suggest gas prices could be slightly lower overall compared to 2025. But short-term spikes still happen, and drivers feel those changes right away when they fill up their tanks.

This pattern should feel familiar to most of us, because it’s one we’ve experienced before.

For example, during the peak of the COVID pandemic, fuel prices went through some of the most dramatic swings in decades, as you can see in this table: 

Prices dropped quickly in 2020 when travel demand disappeared. But as things reopened, demand came back, and prices jumped.

Companies with mileage reimbursement programs had to react quickly. Some struggled to keep up, while others adjusted without much trouble.

The difference was in how those programs were built.

Programs based on real market data handled the swings much better than those relying on fixed allowances.

Why Fuel Costs Matter in Mileage Reimbursement

Fuel isn’t the only cost of driving, but it’s the one drivers notice the most.

They’re filling up regularly, often every week, so even small price increases are felt right away and can add up quickly over time.

At the same time, fuel is only one part of the overall cost of operating a vehicle. Expenses like depreciation, insurance, maintenance, and repairs all play a major role, even if they are less visible day to day.

According to AAA, the average cost to own and operate a new vehicle in the United States is $11,577 per year, or about $964 per month. That cost includes:

• Vehicle depreciation
• Insurance
• Maintenance and tires
• License & Registration
• Sales taxes
• Fuel

When companies build mileage reimbursement programs, focusing only on fuel can miss the bigger picture. The goal is to cover the full cost of driving for work, not overpaying or underpaying.

Programs that factor in all vehicle costs tend to stay more stable, even when fuel prices go up and down.

Why One-Size-Fits-All Reimbursement Programs Fall Short

What’s happening with fuel prices right now is exposing a problem a lot of companies are already dealing with.

One-size-fits-all reimbursement programs just don’t hold up well when driving costs start changing. Flat allowances, fixed mileage rates, or national averages can quickly fall out of sync with what drivers are actually spending when the market shifts.

Most employers tend to rely on a few common ways to run their vehicle programs:

Flat Car Allowances

Flat car allowances give employees a set monthly payment to use their personal vehicle for work.

They’re easy to manage, but they come with some tradeoffs. Because the payment doesn’t adjust with market conditions, things can get out of sync pretty quickly.

When fuel prices go up, drivers may not be fully covered. When costs drop, employers can end up overpaying. On top of that, car allowances are usually taxable.

During periods of fuel volatility, fixed allowances often drift away from what it actually costs to drive.

Company Fleet Vehicles

Some companies try to manage cost swings by providing fleet vehicles.

This gives employers more control over the vehicles and how they’re used, but it also adds a lot more to manage.

Now you’re dealing with purchasing or leasing vehicles, handling maintenance, managing insurance and compliance, and taking on depreciation risk.

Fleet programs can work well for certain roles, but they can get expensive and complicated, especially with large or spread-out teams.

The IRS Standard Mileage Rate 

Other companies use the IRS standard mileage rate as a benchmark for reimbursement.

For 2026, that rate is 72.5 cents per mile. It’s meant to reflect the average cost of operating a vehicle across the U.S., and it’s commonly used for tax-free reimbursement.

But it does have its limits, especially for companies with large, high-mileage teams.

It’s based on a national average, so it doesn’t account for regional differences in fuel prices. It’s usually only updated once or twice a year. And it doesn’t reflect the actual costs for individual drivers.

When fuel prices change quickly, a single national rate may not line up with what drivers are really experiencing in different parts of the country.

Market-Based Reimbursement Programs

Data-based programs like a Fixed and Variable Rate (FAVR) program or custom Cents-Per-Mile (CPM) program are built to better reflect what it actually costs to drive.

They take into account things like regional fuel prices, local insurance costs, vehicle depreciation, and how much each driver is actually on the road.

Because they use real cost data, these programs can keep up with market changes over time.

That means high-mileage drivers are reimbursed fairly, lower-mileage drivers aren’t overpaid, and reimbursements for business driving stay aligned with the real cost of driving for work.

Cardata programs are built using this same approach, with real-world data to keep reimbursements aligned with changing costs over time.

Why Fuel Price Averaging Matters

When fuel prices jump quickly, drivers often wonder why their reimbursement rates don’t change right away. 

It’s a fair question. Their costs have gone up, sometimes faster than the mileage program adjusts.

Programs that use fuel price averaging are built to balance accuracy with stability. Fuel prices change every day, and if rates moved with every spike or drop, payments would be all over the place and hard to plan around.

Using monthly averages helps smooth things out. It captures overall trends, avoids reacting to short-term swings, and keeps payments more predictable.

Over time, rates adjust naturally as the data changes. The program moves with the market, just without chasing every fluctuation.

What Companies Should Take Away from Fuel Volatility

Fuel price volatility is just part of the market.

We saw how quickly things could change during COVID, and 2026 is another reminder. Prices move, sometimes fast.

Companies using fixed reimbursement models often end up reacting every time that happens. Programs built on real vehicle costs are designed to adjust on their own.

For employers with drivers, the goal is pretty simple.

Reimbursements should reflect where employees are driving, what it actually costs them, and how those costs change over time.

Programs that use real market data make that a lot easier to get right. 

That’s how Cardata approaches it, building custom reimbursement programs like FAVR and CPM, that are tailored to your drivers, locations, and business needs so your reimbursements stay accurate, fair, and tax-free as conditions change.

If you’re looking to build a program that actually keeps up with real-world costs, get in touch with Cardata to see how it could work for your team.

FAQs About Fuel and Mileage Reimbursement

Do fuel price increases affect mileage reimbursement rates?

Yes. Fuel is one part of the total cost of driving, so when prices rise, reimbursement rates can increase over time, especially in programs based on real market data. Fixed allowances usually don’t adjust, which can leave payments out of sync with actual costs.

Does the IRS mileage rate change when fuel prices increase?

The IRS mileage rate is usually updated once or twice a year based on average vehicle costs across the U.S., with rare mid-year changes. Because it’s a national rate and not updated frequently, it may not reflect short-term fuel price changes in specific regions.

What is the best vehicle reimbursement program when fuel prices are volatile?

Programs that use real, regional vehicle cost data tend to hold up better when prices are changing. They adjust over time as costs shift, helping keep reimbursements fair for drivers. Examples include Fixed and Variable Rate (FAVR) programs and custom Cents-Per-Mile (CPM) programs.

Is fuel the largest cost of driving for work?

Fuel is one of the most noticeable costs, but it’s not always the biggest. Things like depreciation, insurance, and maintenance often make up a larger share of total vehicle expenses. That’s why strong reimbursement programs look at the full cost of driving, not just fuel.