Does gov. make more $ from gasoline than Big Oil?

Does the government really make more in taxes from the sale of a gallon of gasoline than the oil companies do?

Possibly. Both taxes and profits account for a large share, but which is larger depends on too many unknown factors to allow for a clear answer.

Let’s start with the basics. According to the Energy Information Administration, in February 2008 state and federal excise taxes accounted for 13 percent of the average price per gallon of regular gasoline sold in the U.S.

EIA gas pump image

That figures to just under 40 cents per gallon as a national average. However, the actual amount paid varies greatly by state. Federal taxes are a flat 18.4 cents per gallon of regular gasoline, no matter the price at the pump. State taxes range anywhere from 7.5 cents to 34 cents per gallon, according to the Federal Highway Administration. And on top of that, the oil industry points to additional taxes and fees, such as sales taxes and inspection and environmental fees, that drive up the state-local fees to as much as 45.5 cents per gallon (in California).

And even these figures don’t account for income taxes that the companies pay on their profits. Those taxes would drive the tax total higher yet, but we know of no authoritative source that has attempted to break down how much income tax should be allocated to each gallon of gasoline. One big problem in trying to calculate such a per-gallon amount is that income can be earned on the sale of any number of products besides gasoline, such as diesel, home heating fuel, jet fuel, natural gas, crude oil and whatever else a company might sell.

The same goes for profits. The EIA does not attempt to calculate an average figure for the profit earned on each gallon of gasoline. "It’s not that these guys [the oil companies] are obfuscating; it’s that the processes are intertwined," EIA economist Neal Davis told FactCheck.org. He added that trying to reduce profit figures to a per-gallon average for gasoline would be "heroic at best" and "sadly misinformed … at worst."

Nevertheless, the oil industry has tried to do something close to that. A publication from the American Petroleum Institute, the industry’s principal lobbying arm, displays a graphic stating that "taxes" made up 15 percent of the price of gasoline at the pump in 2007 (that figure comes from EIA) and showing a figure for "earnings" (a measurement API prefers to straight "profit") of 8.3 percent. This figure is the average earnings for the industry per dollar of sales.

On closer examination, however, that 8.3 percent earnings figure turns out to be after-tax income. The pre-tax profit margin would be considerably higher. And that’s only an average. The profits of any particular oil company could be higher or lower. For example, in 2007, ExxonMobil's after-tax earnings were 10.4 percent, much higher than the industry average. Furthermore, any particular gallon of gasoline might have passed through several companies as the product moved from the oil well to the refiner to the retailer that owns the pump.

Another complicating factor is that the percentages change from month to month, sometimes dramatically. State and federal excise taxes are generally fixed at a certain number of pennies per gallon, so as the price of gasoline rises, the percentage paid in excise taxes goes down. As shown in this breakdown, state and federal excise taxes made up 32 percent of what motorists paid at the pump in January 2000, when the average price for regular was only $1.29.

"Unfortunately, there’s no real simple answer," says Lucian Pugliaresi, president of the Energy Policy Research Foundation, which conducts economic analyses of energy issues and is supported by oil companies. It depends on when the gasoline was purchased. "If you bought it right now, I’d say the government is making more." If the gasoline was purchased a month ago or last year, that may not have been the case. And the answer further depends on what type of company the question refers to. Refineries, Pugliaresi says, are hurting right now. "If you’re an independent refinery, the answer is definitely they’re making a lot less than the government."

So, to the question of whether motorists pay more per gallon to the government than to oil-company profits, we can say only this: The answer depends on the state in which the fuel is purchased, the company that produced it and sold it, and when the motorist bought it.

-Lori Robertson

Sources

American Petroleum Institute. "The Truth About Oil and Gasoline: An API Primer," 31 March 2008.

U.S. Energy Information Administration. Gasoline Components History. What we pay for in a gallon of regular gasoline, accessed 8 April 2008.

U.S. Department of Transportation, Federal Highway Administration. Tax Rates on Motor Fuel, 14 Feb. 2008.

U.S. Department of Transportation, Federal Highway Administration. Tax Rates on Motor Fuel, 14 Feb. 2008.

I don't doubt what you are saying, I just find that if you stick a shovel in "your" dirt, and find a lump of gold, that if the gold isn't really yours,than neither is your property.

Many owners find to their surprise that old Great-grandpa-Jones sold off those mineral rights to someone else (e.g., a mining company) generations ago. Or that when they "purchased a property" themselves, the mineral rights had already been severed and was owned separately, and what they bought (what the owner had available for sale) was only the surface rights.

Note, of course, that a lump of gold would also be different from petroleum. You could sink a well on your own property and pull in petroleum from under a neighbors, while gold mining would require that resource to be under your own property for you to get it.

And water rights are also somethihng separate. The east uses riparian water rights (English common law), while the west generally uses prior appropriation (from Spanish law). Similarly, many of the states that claim ownership of groundwater themselves are in the west.

So, actually, the west is less friendly to individual property owners, in a way.

Of course, the government is selling off land to mining companies at fractions of a penny on the dollar of its worth. Mining companies make out like bandits when dealing with the feds in many cases. It's an interesting field and I don't claim to be an expert.

Your explanation makes sense. I do see a substantial difference between great-grandpa selling the mineral rights, and a provincial government assuming them without compensation to the owner. Canada is doing very well, but they are starting to get greedy. While in some ways, they are allowing more drilling than the states (bigger place, fewer people), they charge substantially more for the rights to the point where the oil companies threaten to pull out (especially over the more expensive extractions, like shale oil). When the price drop comes, if it comes, the country will be in for a shock.

I didn’t know that the west (outside of the southern California area) had different water rules than the east . Here in prairie Illinois we have more water than we know what to what do with. Frankly, I do not believe that property values are absolute. I have never gotten a good answer from a libertarian when confronted with the question of someone damming up a river on his property, thus depriving all downstream of the water. Some protections have to be built in or a society cannot function. Of course, things get out of control very easily, and have at least since the progressive era if not earlier.

A dam only stops water temporarily. Once filled, the flow continues as before. The dam just hoardes a bunch of it.

Actually, that's not exactly true.

A dam allows greater infiltration (recharge of aquifers), and more evapotranspiration (loss to the atmosphere). It also traps sediment, not just water, meaning that downstream properties become sediment-starved unless they build a sediment trap of their own (without the sediment, erosion increases).

Plus, many dams are built to allow water use. Going back to the original point, a libertarian response might be that if the water is on the property, dammed up, it could be consumed by that property owner.

I am a libertarian conservative, not a libertarian, in large part because the natural world doesn't follow the nice rules we'd like, and individual actions can affect areas across boundaries and property lines. For example, the damage we are doing to aquifers now, by using water faster than it it is recharging (e.g., near Denver) is irreversible. Even if we were to cut back or try to artificially add water piped from elsewhere, the aquifer structure has collapsed.

Similarly, if we don't look at watershed-wide conditions, we are not behaving responsibly.

So I am a conservative...noting the "conserve" part in there, and realizing that being irresponsible and using our resources so rapidly is far from a conservative behavior.

...For example, the damage we are doing to aquifers now, by using water faster than it it is recharging (e.g., near Denver) is irreversible.

Bullshiite. The people can move, or make water from air.

Who gets the blame when a beaver makes a dam? Is a beaver dam any better, or is it that we lousy humans haven't any rights to our property?

I should be able to have a pig sty, or a dam! I pay my fealty taxes, yet I have no fourth amendment rights from a BUILDING inspector, who can levy fines and condemn my property. I haven't the right to keep a county tax assessor from my land. Anyone working for gum't, except a cop, can come onto my property without a warrant. Some of them abuse it as well.

This is no longer a free country. The constitution is clouded by socialists and their progeny. You sound like you may fit in, though you plead libertarian! Your explanation sounds just righteous enough!!!

I am learning about the law. I have learned that justice sometimes happens, but lawyers always get big checks! The courts are now crowded with social causes and class action suitors. It makes big awards become little settlements for the victims.

Motions, anyone? I have a few I'd like to make...

Bullshiite. The people can move, or make water from air.

LOL! You can change the laws of physics, eh? Do tell, oh wise one, how you have overcome the problem of hysteresis. And don't you think that those alternatives should be done before the Arapahoe goes unconfined?

Who gets the blame when a beaver makes a dam? Is a beaver dam any better, or is it that we lousy humans haven't any rights to our property?

Wonderful logic. Nature starts fires and they might burn down a house...therefore, I can start a fire that might impact your property.

Just because something occurs naturally doesn't make it something we should do.

I should be able to have a pig sty, or a dam!

As long as you impact nothing else, fine...but if I make poison gas upwind of you and release it to drift onto your property, I guess you wouldn't mind.

This is no longer a free country. The constitution is clouded by socialists and their progeny.

Agreed. You sound like you may fit in, though you plead libertarian! Your explanation sounds just righteous enough!!!

I plead libertarian as an adjective to conservative. As I said, I recognize that there's an objective reality in which we live, and I am adult enough to face it. One of those realities is that political boundaries don't constrain physical phenomena.

I pay my fealty taxes, yet I have no fourth amendment rights from a BUILDING inspector, who can levy fines and condemn my property. I haven't the right to keep a county tax assessor from my land. Anyone working for gum't, except a cop, can come onto my property without a warrant. Some of them abuse it as well.

As you pointed out, such a mess has been made of the Constitution. Part of your complaint is overreach, yet you argument relies on extra reach of the Constitution as more than just a restraint on the Federal government to restrict local ones.

Do you hear any complaint from me about your complaint about this issue? Nope.

I am learning about the law. I have learned that justice sometimes happens, but lawyers always get big checks!

Exactly right.

And I suggest that as long as people are pig-headed about resources and react rather than manage them, it will only get worse and we will see frustrated citizens turn to more socialist solutions.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.