Many in Washington would like motorists to think the high prices they are paying at the pump these days are flowing directly into the pockets of ExxonMobil and other oil companies. This misperception helps fuel the demonization of “Big Oil” and the misguided notion that energy prices can be solved by raising taxes on the oil industry.
But the facts prove otherwise. Because of gasoline taxes paid by motorists, the government takes in far more money on a gallon of gasoline than an oil company does. How much more?
- Through the combination of state and federal taxes, the government collects an average 48 cents on each gallon of gasoline sold in the United States.
- Gasoline taxes are far higher in some states, such as California and New York, where motorists pay about 66 cents. Taxes are even higher on diesel, which fuels commercial transportation.
- By contrast, during the first three months of this year, for every gallon of gasoline and other products ExxonMobil refined and sold in the United States, we earned about 7 cents.
My point here isn’t to criticize gasoline taxes or their purpose. I just think that when it comes to addressing the rising price of commodities, including gasoline, we need to deal with facts. The American public deserves some straight talk from our political leaders if we are going to have a sensible discussion about energy policy in this country.
All the talk in Washington about how we can lower energy prices by raising taxes on the U.S. oil industry is misleading – and, as the Wall Street Journal noted last week, “junk economic theory.”
When I was much younger, and first driving, gas was 19 cents per gallon, and nobody was screaming about oil company profits then. When I was 20, I bought my new bride her first new car, a VW beetle, for $2160.00 out the door. Now a beetle is $26,000.00 and gas is $4.00. This is called “inflation”. Now, to be fair, gasoline has risen disproportionally but there is a different cause for that. When the U.S. went to “Federal Reserve Notes, in order to keep money stable, we tied ALL oil pruchases to the U.S. Dollar. Fast forward…..now our government has so debased the dollar that foreign governments no longer want to take our currency. In order to protect from the falling value of the dollar…..they raise the sale price of a barrel of crude. So the key here is to watch the value of the dollar….when the dollar drops, foreign crude prices go up. The group most often lashed out at, “Big Oil” is not our enemy here. Our government and the Federal Reserve Bank….they are the problem……and higher taxes on corporations and big business is not the answer.
Richard Bourg
Risk Analyst
Mr Bourg, you must have slept through the Economics Class.
When the oil companies drove the price of gasoline over $4/gal it caused the ENTIRE economy to inflate! You accept that they are only getting 7 cents/gallon profit while their quarterly reports have shown a continuous Record Gain for the last MANY years.
Your denial of the conspiracy between the oil companies is to be expected given your position but it is really impossible for a thinking adult to accept.
I DO remember the 1973 Oil Embargo FRAUD which allowed ALL of the refining companies to destroy the Mom& Pop stores which were selling the overproduction gasoline. By closing them EM and all others were able to continue to operate without any new refineries for about 30 years.
There was NEVER a shortage of crude, only a pretense by EM and all others.
Ken, this is useful information but it would be helpful to include a breakdown of where the rest of the $3-4 per gallon go. I retired from EM 5 yrs. ago and I try to use your blog to address issues/concerns raised by others who do not have a general knowledge of the oil business.
The EIA has some material that may help with that Mark.
http://www.eia.doe.gov/oog/info/gdu/gasdiesel.asp
You don’t need to be in the business to realize you’re getting screwed. Nice try, bet you got a fat pension too. I would push my car past a mobil station. I work next to one and when oil goes down it is never reflected in the price unless it goes up a couple of pennies and then look out. How stupid do you think the American people are?
You earn 7 cents and we GIVE you 4 billion a year of our tax money. You can try all the PR you want, it will only work on your shareholders. Why is it when oil goes down you never change your price but when it goes up omg, look out aand it stays up. I will buy Canadian gas from now on they pay more taxes in this country than you corporate welfare queens.
The 48c given to the government does not help the US people. The US governemnt spends the money to serve the interest of the Big Oils by financing wars, like in Kuwait, Iraq, Iran. Continuously petroling the Persian Gulf, Mediterranean sea, setting up bases in Central Asia and securing Oil interest by giving freebees to an outpost called Israel.
Read My reply to Jane Sargent above.You sound like an idiot!!A large share of the 48 cents goes to hiway repair and building!!
You are another uninformed person!!They are not given 4 billion a year!This is what the libs would like to have You believe!!What You are talking about is an oil depletion allowance.It is comparable to a depreciation allowance in anyother buisness!!
Why do You not educate Yourself and not go along with everything the Libs try to make You believe>
Actually oil companies have one of the smallest profit margins of any industry!Bet You never compared it to fast food(McDonalds ETC)drug companies,soft drink and bottled water ETC.
Also who is big oil??If You have a retirement plan,mutual funds,ETC You are most likely own part of big oil!!
The reason You read about these huge profits in dollars is because oil has so much invested!
7 cents earned profit (after considerable risk of loss) compared to 48 cents in bureaucratic spoils. ExxonMobil produces a lot of oil. For that 48 cents, how much oil do the bureaucrats produce?
It was V.I. Lenin who said to grind business between the millstones of inflation and taxation.
That sounds as destructive as Obama saying that he was the only thing standing between the pitchforks and the CEOs. That pitchfork analogy went right past me until I read ‘Shakedown Socialism’. Ol’ Joe Stalin, wasn’t he a character? Killing some 10,000 Ukrainians per month by starvation makes the Spanish Inquisitors look like a bunch of amateurs.
If “hot fuel” is such a non-issue with you guys, then what was this all about:
“If the Petroleum Marketers Association of America wants to hire a room and serve free drinks or meals to regulators at Harveys Lake Tahoe Hotel, no one can stop them. Weights and measures officials could accept a boat ride, too. But should the regulators be asking them for the money and offering formal membership in the conferences where big public policy issues (including fuel temperature compensation) are being decided? “
“Shouldn’t the drinks, the lake outings and the gala dinner be reported in public documents as gifts, naming the givers and occasion? That’s what’s required in many states, including California, if an appointed state official accepts even a gift of breakfast.
I sympathize with how the current arrangement came about. Everyone at these intense conferences needs a breather. But the overt expectation that private funds will underwrite a conference of public regulators seems like a throwback to the Standard Oil Trust..”
http://www.oilwatchdog.org/2007/09/cruising-on-the-company-dime/
Unfortunately, little is said about what those 7 cent earnings are “after”. Sure’”after” costs-what’s actually included in costs? Is it like Google double Irish Sandwich,, paying royaties to their own subs? Is it after short term financing and the Investor buys? Is it after the monster bonuses? How much can we trust Offshore accounting, Bermuda accounts,?
Also, how may sub LLCs and plain ‘ol Inc.s are under this “umbrella” of a company?
Finally, what relationships exist, in these very very concievable scenarios, of off shore accounts and subchapters, involving “Investment Banks” and the futures markets? Some how I just don’t see an International company having any regard for anything other than what they could get caught at.. and then the cost thereof.
Would someone enlighten me. Gov Palin in Alaska has taxes at 26 cents a gallon and Ca and other states pay 60 plus cents a gallon. Why would we not like to have someone like that be our President?
Next, if we all get small cars or electric cars where will the taxes come from to fix our roads and bridges?
Next, if we obtained all of our oil from our own land and ocean what would the result be in jobs, taxes for our Govt and international debt.
ps; This is my first time comment
Mr Provost, PLEASE go to CAFR1.com and you will see just what money is available to government.
The combined investments from ALL governmental agencies/offices owns over 50% of all stocks traded on the NYSE! Ob…s… didn’t take over the carmakers as President, he did it as the largest shareholder!
NEVER believe what ANYONE in the oil industry has to say!
For first time You are great!!Make a lot of sense!!
Gas is $4.00 a gallon. If the government takes $0.66, and you take $0.07 in profits, then what happens to the remaining $3.27? Who gets that money? Oh, right, also you. So really you take $4.00 in revenue per gallon, the government takes $0.66, and then you blow through so much money that all that’s left over for your poor investors is a measly $0.07 a gallon.
It’s not your fault, you had insanely lavish expenses to cover, like the $29 million you spent in compensation for your CEO in 2010 (according to forbes.com) and all your private jets. Luckily, because you sold over 5 trillion gallons of gasoline, your investors still made billions of dollars! Amazing how you do so well despite being so put upon by greedy governments demanding 16.5% of your income in outrageously burdensome corporate taxes.
Wait, isn’t that way less than an average American making $35,000 a year would pay? Oh, that’s right, I forgot you used tax loopholes to funnel most of your income through subsidiaries in tax haven countries like the Cayman Islands. Hmm, is it possible you came up with a misleading graphic to dupe… read more »
…readers into believing that the government is somehow actually HURTING the economy by trying to collect what little taxes it can from your army of accountants? Now that’s what I call a “junk economic theory.”
Wow! Angry much?
Let’s see now, for domestic production there is research and exploration, deep and/or directional drilling, site leases, EPA compliance, production and storage, transportation to refinery, refining to EPA formula specific to each different state and season, more storage, more transportation, etc. Yep, that’s all free now, I guess. I must have slept in that day!
But most of the oil we refine used to be purchased elsewhere. I say ‘used to be’ because now it must be free! All that smart diplomacy, you know.
These two messages are the heart of the argument. The original comparison of seven cents vs the tax amount unfairly demonizes taxes. We ask government to do a few things, for example to make sure Exxon doesn’t need to spill oil on the ground to be able to compete with mom & pop drillers.
A lot of things in Exxon’s costs are completely ignored. Aside from the manhood stuff there are some hard questions we’re not going to cover in one sound bite. We’re not asking how much Exxon spends to acquire oil on Wall Street, or how much we need those acquisitions to support our pension investments. We’re not inquiring why JP Morgan holds more oil in its offshore tanker fleet than Exxon has in inventory, and how that relates to Exxon’s ability to report rising profits when the stock market falls. Don’t get started on upstream partnership arrangements, without which there would be no drilling miracle in the US. And we won’t ask why the Pew (Sunoco) trusts fund Clean Water Action and the Rockefeller Trusts fund the Toxics Action Group. Our industry is a lot more complicated than… read more »
…our “roughneck manhood” advertising wants to let on.
I’m been in the energy business for years and I’m proud of the work we do. And that includes many of the things our regulators do to help keep our competitors honest. These endless right-wing anti-government messages embarrass me. I used to be particularly proud of the insightful way Exxon approached the business, but the move to Texas seems to have made the company proudly mean spirited. I wish you guys would stop oversimplifying the story and act like leaders again.
That tax graphic is pure crap.
Exxon Mobil made $41.1 Billion in profit in 2011 and paid an estimated 17.6 percent tax rate.
According to that chart their annual revenue would have been close to $600 billion
Further, they pay less than 15% in taxes, but that kind of revenue should have funded the country with more than $90 billion – didn’t happen.
Mr Cohen, I think the 7c per gallon shown above is only the profit from “refinery to pump distribution side” and only the tip of the iceberg. The “Big Oil” invests big money to make big profit, by production sharing with oil field owners, additional Oil field development is big area where they make money, they own the vlcc/ulcc (only exxon valdes comes to mind due to wrong reason) to make money in shipping, they own the refinery to make some more money. Else my arithimatics do not work how they avail their huge bonuses and travel in private jets. Offcourse, they use separate companies to divide up the whole profit . Shall appreciate if you can correct me if I am wrong.
Unbelievably bogus corporate doubletalk. OK so Exxon makes $0.07 of PROFIT per gallon – well that is a hefty amount when you count up all those gallons. And that’s just the profit; this blog conveniently avoids making any mention of how much REVENUE Exxon hauls in per gallon. That would be all but the tax share. The profit has somehow enabled Exxon to be the most profitable enterprise in the history of the world – not bad.
Bear in mind, those taxes benefit us all, except those who don’t use roads or buy any products that travelled on roads.
The world would be a better place if fuel taxes AT THE PUMP were way higher than they are now. Rather than placing indirect (but politically popular) taxes on oil cos, a bold plan would be to jack up taxes at the pump. The funds could be plowed not only into roads and infrastructure but also into efficiency and sustainability programs, R&D on alt fuels, improving mass transit, bike lanes, etc. All the while consumer behavior would be modified to get people out of their gas guzzlers and onto their feet and bikes. The skies… read more »
…would be bluer, we’d be healthier, our communities would improve, we’d have less dependence on foreign or domestic oil, we’d live safer lives, our communities would relocalize, and our food would improve as it would not be based on loads of petrofertilizer and transport miles.
Ahhh, but Americans are so shortsighted that they actually think that fuel taxes are unappealing.
Exxon et. al., great job, you’ve really swindled the people.
re: “My point here isn’t to criticize gasoline taxes or their purpose …”
Strange, this should exactly be your point.
Listen, I am neither a proponent or a detractor of big oil, but it HAS to be acknowledged that oil profits are beyond sufficient. A couple of years ago, now, during the fourth quarter, Exxon profits alone exceeded the total profit dollars of ALL power and utility companies combined from that date to the end of WWII. It was mind-numbing to read the reality of that fact. Any hand-wringing by Exxon/Mobil comes off as disingenuous. In cases like this, your PAC expenses and spin make you look bad-which is probably not what you are going for! You don’t have to apologize, but you don’t have to create a negative image by misplaying your hand.
So a company produces a product that people want, in this they make a profit and now they are to be demonized? Someone should tell Apple. Also you should check to see what is involved in production of a gallon of milk versus a gallon of gasoline and then compare the price of the two, you will never buy milk again.
What you fail to mention is that Exxon makes 8 cents per gallon on the refinery process. You don’t mention that you sell the oil that you extract to yourselves and make profit from that side as well (as dictated by the global market). Certainly there are other oil extracting companies that you may buy product from, but I imagine a substantial portion comes from Exxon rigs. The question I ask is when you sell a barrel to yourselves does the Exxon refinery write off the cost of the barrel on their taxes? Can your profit from one arm be written off as cost on the other arm?