A lot of factors go into determining the price of gasoline, so it’s worthwhile every now and again to review them.
A good piece in last Friday’s Wall Street Journal does just that, asking simply why gas costs what it does. The author – an analyst for a taxpayer watchdog group – gives a quick rundown of the basics, like crude oil costs, which can account for roughly three-quarters of the price consumers pay at the pump. Then there are expenses for refining, distribution and marketing.
But he also reveals one slice of the gas price pie routinely overlooked by those who criticize energy companies or gas station owners for high prices. He writes, “The truth is that governments rake in a larger profit at the pump than anyone,” including companies like ExxonMobil.
A range of government authorities share in the tax revenue from the gasoline consumers buy. To start, there’s the federal gasoline tax of 18.4 cents per gallon. A variety of state and local sales and excise taxes help boost the price as well. All told, American motorists pay an average of nearly 50 cents per gallon in taxes every time they fill up.
Looking at it this way, the author concludes that “government makes far more from gas sales than all of the oil companies put together.” ExxonMobil, for instance, earned just 8 cents on each gallon of gasoline and refined products sold in the U.S. during the first two quarters of 2012.
All things to keep in mind the next time you hear criticism of oil companies for the cost of filling up.
Oil companies spent money, effort, time, talent and took all the risks to explore, develop, transport, refine, distribute these fuels. All these efforts for the refiners to make about 10 cents per gallon. In the meantime, the government sat back, does nothing, and collects 50 cents per gallon.
Sounds fair? Not quite. This government under the current administration thinks this exercise isn’t fair since it wants more tax from the ‘big’ oil companies. If the government gets its way imposing punitive taxes, then the U.S. petroleum and energy companies couldn’t compete with the OPEC nations, the Chinese the Russians, etc.
Bad policies deteriorate energy security, hence threaten U.S. national security.
This is hogwash. No way could you have a multi billion dollar profit per quarter at .08 per gallon. They would have to refine 12.5 billion gallons per quarter per billion in profit at .08. I think it is more along the lines of the crude that is pulled out of the ground on federal leases that they don’t pay for. I think that gives them another dollar or so per gallon of gas. they reported a 10.7 billion profit in one quarted of 2011. People were driving less and had more fuel efficient cars. Doesn’t add up very well. the us uses about 1.7 billion barrels per quarter@ .08 the profit would be 136million. that is if exxon mobil supplied all the fuel in the US. Many more companies supply also. Seems like if exxon mobil is making all this money they could pay off their judgement for their crashed tanker valdez. Still remains unpaid after 25 years.
The quarterly profits are worldwide and all divisions, upstream, downsteream, chemicals, etc… Its no wonder you cannot make the math work when you are trying to compare against just US gasoline sales. Too bad you went to all that trouble to find the consumption and refining stats when you obviously have no grasp of basic math
Not only that, but he used profits of 8 cents a barrel, not a gallon, so he is off by about 55 times before all his other assumptions.
Crude oil is sold by the barrel and is only 32 gallons per barrel, as is a barrel of beer.
No he said “gallon”, in the middle of the third sentence from the bottom.
The only hogwash here is Roger’s post. Go to the SEC site and find that Exxon refining and marketing in the US had 2nd quarter 2012 volumes of 9.4 billion gallons (1,740 thousand barrels per day refining and 2,488 thousand bpd marketing) and profits of $834 million which yields 8.8 cents per gallon. Note: there are 42 gallons in barrel and 90 days in a quarter if you want to do your own math.
About 70% of Exxon’s profit comes from non-US operations, so any analysis of US gallons versus world wide profits is….what’s the word I’m searching for…hogwash.
Also, check the New York Times in the summer of 2008 for the stories about the Valdez settlement resulting from a Supreme Court decision.
Take it from the start from the time the oil companies look for the oil drill buy supplies pay workers ship refine deliver the government made lots of money by taxing with no overhead to care about
This would be a valid argument if all they refined were gasoline. But the fact of the matter is they refine many other useful substances. Not the least of which is diesel fuel, and jet fuel. You are looking at gasoline and assuming that they are the only gallons that exxon refines.
A few weeks ago, Mr. Tillerson expressed his concern over the lack of scientific critical thinking skills. Those same lack of skills are exhibited in the WSJ opinion and this perspective.
To begin, the 8 cents profit per gallon conflicts with the commonly expressed 7 to 8 cents per dollar of sale. Why? The cost of crude included in the fuel price at the pump is the market price with some profit built in, not the production cost. At gas stations around the world, ExxonMobil is making money off of “cost of crude” though at any individual service station they may not. And if ExxonMobil is not profiting off that cost of crude, another company is.
More important, a profit is what remains after costs are recovered. The government does not profit off of gasoline taxes. Gasoline taxes pay some of, but not all, of road infrastructure costs, around 50% of highways, and typically 10% or less of local roads. In Texas, zero percent of arterial and local roads are paid for by gas taxes. The remainder is paid from other revenue streams, including property and sales taxes.
The government does not make money or profit off of… read more »
…gasoline taxes. Those taxes go towards real costs – maintaining, improving, and building new roads and bridges (almost entirely highways) — and gas taxes are not sufficient to be considered as a user fee. Driving is massively subsidized. With improved fuel economy, more vehicles on the roads than designed, and gas taxes not increasing with respect to inflation in almost two decades, drivers do not pay close to the full costs of their road use. Fuel taxes would have more than double to cover all roadway costs.
Is ExxonMobil’s position that drivers should not be paying for their road use, and that those costs should be paid by others? Is it your position that gas taxes are too high? How else will roads be paid for if not in part by the user? Claiming the government makes more of a profit per gallon than ExxonMobil may be politically expedient during an election year, but it is false. If anything, gas taxes are too low as the full costs aren’t paid by the user and we are underinvesting in our infrastructure and future.
When you fill up at the pump, the government is not making money. They are recovering some of the costs of your driving, while the remainder is subsidized through other revenue streams. Remember that when you fill up.
The 8-10 cents per gallon the retailer makes on average and the 50 cents per gallon the government collects are both revenues or gross incomes. They are not expenses. I believe the point of the article was to show the relative amounts collected at the pump. How the retailer and the government spend those amounts is another issue. Also, credit cards add an additional 8-9 cents to the cost per gallon.
So only drivers benefit from roads? Without roads, how do we get goods to people? Contrary to popular opinion, you can’t do everything with an “app”, someone still has to physically make it happen. Raising the gas tax to pay for all of it is both regressive, because it builds the cost into the price of every item, and insidious, because it becomes impossible for the one paying the tax, the consumer, to see it. If anything, we should eliminate the gas tax, replace it with a sales tax, and exempt commercial/agricultural gas.
You’re right, the government doesn’t make money off anything. They just take it. Your entire post lacks an understanding of the article.
According to the U.S. Census Bureau, petroleum imports account for over 50 percent of the U.S. trade deficit. Furthermore, combined data from the Energy Information Administration (EIA) and U.S. Department of Labor shows that there is a strong connection between gas prices and the unemployment rate. When gas prices increase, the unemployment rate also rises sharply.
When gas prices climb, especially over $5 per gallon, evidence suggests that the stock market also suffers. Commodity strategist John LaForge of Ned Davis Research reported that a price increase of 33 percent or more during a six month period results in a weakened stock market performance – a situation that United States has encountered recently.
I read this article, then checked the points made at about 6 different sites. It’s apparent that many did not check before their diatribe. He’s correct in his claim of profits v government taxes. I dispise oil companies but I dispise cool-aid drinkers even more. If you want REAL prices at the pump then you need to get government subsidies and anti-trust protections out of the equation. With real competition real prices would result. But it’s easier to spout the “line of the day” dictated by the Party, Union, Educator, Social Group, etc; because it requires no critical thinking. As a mentor of mine used to tell me and I share with you who can only write from emotion, “Engage your brain before you open your mouth”, that’s good advice.
Oh, boo hoo hoo, poor Exxon/Mobil is getting taxed by the big, bad governments! They aren’t getting taxed nearly enough! All oil companies should be nationalized. The idea that a group of private investors can suck all the worlds’ natural resources out of the ground right from under our feet and make billions in profits a quarter and pocket all the money is obscene. And then they have the nerve to whine about how heavily THEY are being taxed! Oh, boo, hoo, hoo!
Hugo Chavez has the right idea. All the “profit” that comes from industries like oil refining should be put right back into the nation the oil comes from and used to build top quality free public schools and universities and pay for a national health care system. $10 billion in profit per quarter should not be allowed to be siphoned off by a gang of billionaires and used to buy monstrous mansions to satiate their monstrous egos and for expensive baubles for their many mistresses and the prostitutes they rent by the dozen. And then they would also not be able to purchase those other prostitutes they purchase outright – like… read more »
…the US Congress.
How can you calculate the profit Exxon makes off a barrel of oil? It’s impossible. Open the books, Exxon! Let us inspect your corporate swindle and see where the money is coming from! It’s not oil, apparently.
Not having any access to Exxon’s actual corporate records, let’s try to parse the roughly $10 billion a quarter Exxon makes in profit, using gasoline only as the profit center.
Exxon claims they make only $0.08/gallon profit on gas. There are approx. 19.5 gallons of gasoline produced per barrel (42 gals/bbl) of crude. So, Exxon’s profit per barrel of crude on gasoline only is just $1.56/barrel. According to Wikipedia, Exxon’s daily refining capacity is 6.3 million barrels a day. Lets say that is crude oil going into the refining process, yielding 19.5 gallons of gasoline per barrel x 6.3 mn bbl/day = 122,850,000 gallons of gas a DAY. Times 30 days that comes out to 3,685,500,000 gallons a month. At $0.08 profit per gallon, that is $294,840,000 dollars in PROFIT a month, or $884,520,000 a quarter – just from gasoline. So, what happened to the other $9,115,480,000 in profit Exxon claims to make (roughly) per quarter? Where does it come from? Well, first of all, Exxon’s pipeline charges Exxon $$$ to transport their own crude to their own refineries. Then, Exxon’s wholly owned refineries charge Exxon a lot of money to refine Exxon’s crude into Exxon’s gasoline. Exxon’s trucking firms charge Exxon $$$ to deliver Exxon’s gas to the Exxon gas stations, who overpay Exxon for the Exxon gasoline… etc., etc. So their “cost of doing business” consists of their various businesses – which they own – paying each other off to perform work for their sister businesses. It’s a giant money-go-round. Until we expropriate Exxon, we’ll never know how much money they steal from the world using this gigantic corporate swindle-o-rama.
Meanwhile, Exxon is deliberately decreasing production in order to drive up prices even further. All of you who have to drive cars to get to work can just kiss Mobil’s butt for all they care. Their executives are laughing all the way to the bank while American workers struggle to pay ever-rising costs for simply getting to work. (We’re talking about you, California!) Ain’t capitalism grand? No, it ain’t – unless you’re an Exxon/Mobil executive or a major shareholder. It’s time to nationalize Exxon and all the other oil companies and put all this “profit” to work for the working class! Workers of the World, Unite!
Nationalized like Hugo Chavez huh?? Might want to check a few facts before you wish for that. Venezuela’s oil production has declined since Hugo nationalized the oilfields in Venezuela. The state of repair of the existing facilities is declining increasing the chance on an accident and the Venezuelans trained in the oil industry have, for the most part, left Venezuela. Lets see the US Government runs the postal service, its broke while UPS and Fedex make plenty of profit. The Us Government runs Social Security, its broke. The US Government runs the Medicaid and Medicare system, its broke. Are you grasping the common theme here?? So let the US Government nationalize the oil companies and see what happens to the price of oil and the price of that computer (mainly composed of plastics made from hydrocarbons) you typed your note on. Finally, if you think ole Hugo is such a nice guy, go spend some time in Venezuela and see how it compares to the US.
Um, in general, from what I’ve seen, Governments taking over corporations has tended to fail horribly. When they ran the Post Office it was turning out huge amounts of waste and increasing our deficit by millions each year because of government oversight, and the fact that decisions were making without thinking about cost or efficiency, but on popularity and reelection. Prime example, Saturday delivery? Would have saved us millions of dollars a year if we got rid of it, not to mention saved thousands of government mail jobs. But because politicians thought that it was “an american foundation” it was kept, and we kept bleeding money from the post office for almost 20 years. Privitizing the post office was one of the best decisions the Government made.
Its not about having the government controlling and running corporations, its about having transparency in those businesses. Its these shadowy things that government, and business do that end up screwing us. Its why organizations like wikileaks, and anonymous exist. If they didn’t want these things to exist, then don’t hide things from us. When you do, you end up with these… read more »
…things.
What your talking about is just stupid. Capitalism is a good idea, when the playing field is set up right. Right now? Its schewed so hard in the direction of companies its not even close. Heck, I buy a computer game, and I get a 30 page terms of use and legal policy that I have to agree to to use it. Corporations can donate to politicians anonymously up to billions of dollars if they feel like it, and also have lobbyists that can sit in that same politicians office for their entire time IN office whispering the companies wishes into their ear every day all day. Workers of the World Unite, …… sigh. You give control to the Government, it generally becomes more controlling and vindictive and HARDER to deal with than a corporation. If you don’t like a businesses practices, you can just stop spending your money there. The government will just take it, whether it be through taxes, or sales tax, or any other number of taxes they render.
It appears that you confused net revenue and profit. The government has oil related expenses too.
Last time I checked I thought we( the people–our government) were going into debt for our fuel.
How about the cost our wars to maintain access to the oil?
How about road maintenance and other programs to keep our automobile industry going?
I believe we should fund our governance through taxes that have the effect of lowering the consumption of important resources. Thinks like poor farming practices, and extraction of oil, and logging would be taxed in such a way that manual labor to recycle and innovate in “green” technology would become the norm. Less obesity, more resources, more jobs.
It is a bit late, I mean Gross revenue.
If you make so little on the price of gasoline, how to you wind up with multi-billions in profit?
Because they produce, sell and invest in many things outside of gasoline. You should read the company profile and prospectus to find out what a diverse company XOM is. Please also read about the many projects they invest in to further education, enhance the environment and charitable contributions they make for the good of others.
I am proud to be a stockholder in this company. Their hard work and innovation over the past decades as contributed greatly to my standard of living as well as the education of my family.
All very interesting. Actually we would all be better off (except the oil companies) if the price per gallon of gasoline were north of $6-$7 per gallon. That way you would not have to legislate efficiency, and you could use the taxes generated to build infrastructure or reduce the deficit.
Many conservative economists (like Greg Mankiw, Romney advisor) support a carbon tax, which increasing taxes on gasoline would be a part of.
Do people not realize that on top of that .08 cents a gallon, they are also getting the cost of gasoline subsidized by the Government as well? That’s why they charge almost 50 cents a gallon, heck in the end they are actually losing money on that deal. If gasoline wasn’t being subsidized by our Government, gas costs would be closer to what you see in Europe, at almost 8 to 10 dollars a gallon. So while you think they are making so little a gallon, your right, they are making very little profit, but all their expense are covered, and they are making 8 cents a GALLON. 1 gallon, heck they make 80 cents a week off of me. thats 41.60 dollars a year from 1 person in the united states that fills up once a week. How many people you know that fill up more than 10 gallons a week? I know quite a few. You really wanna see some crazy stuff, remove the government subsidy’s and watch the cost of gasoline skyrocket.
the tax ‘burden’ of 50 cents per gallon makes any european laugh, Currently in Germany we pay something like $4 per gallon in taxes alone.
The “Government” that taxes 50 cents a gallon uses that money to build the roads, bridges, tunnels, highways, lighting, signage, rest areas, police officers, trucking regulations, weigh stations, traffic control centers, and everything else it takes to make the United States Transportation system work, so we can use that gas up…. Thank God they taxed the Oil, and built the greatest highway system in the world so travel is comfortable and affordable for many of us and created this giant industry… That Tax is very needed… It actually cannot pay for all the roads… We must tax tires, tolls, and various other products to build all this…. Of course we could stop the taxes and let the bridges, roads and all just crumble and the whole system go into chaos if that would be the solution…. And oil would not have needed to explore much if they had not had the government to build the roads… But of course the alternative to tax and build is toll stops and build… and anyone that has lived in or around a city that stops your car every few miles to collect a couple bucks knows how much fun that is;~}
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?