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

FactCheck.org ^ | 05/23/08 | Lori Robertson

[coffee260]

Q:

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

A:

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. 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.

[The Great RJ]

What is obvious from this article is that the high cost of gasoline is NOT driven by exorbitant profits, but by higher crude oil prices. I also remind my economics students that "big oil" is not like the old days when it was owned by J. D Rockefeller and a few cronies. Big oil is corporately owned and those big profits mean dividends to stock holders that include pension funds, local governments and even little old ladies in tennis shoes not to mention windfall revenue to federal coffers from the corporate income tax and the taxes paid by stockholders on their dividends.

Congress shows its utter ignorance by pillorying oil executives about high gasoline prices when they are the primary cause due to not allowing the development of new domestic sources of oil or the building of new refineries.

[rabscuttle385]

Yes. Gas prices are astronomically high and headed higher.

Isn't that what everyone thought about housing?

[Dr. Sivana]

What the article does not tell us is what portion of the oil produced is owned by the oil companies. Most oil is drilled for by the government or on government leased lands. I understand that the oil companies don’t make a lot if they buy oil at $130/barrel, before they sell it for $3.80/gallon after refining and taxes. I want to know what portion of the $130 price actually goes to the oil companies.

[BMC1]

Drill here, drill now and build refineries. Tell Congress to stop playing politics with our lives and economy in order to hang on to power.

[Dr. Sivana]

One other question. Does the cost of refining stay at 8% regardless of the cost of oil, or does it go up and down as well?

[coffee260]

Tired of Congress preventing us from drilling for our own plentiful oil resources?
Sign the Warroom's Drilling in ANWR Petition!

[thackney]

It varies

Gasoline Components History
http://tonto.eia.doe.gov/oog/info/gdu/gaspump.html

[Gondring]

However, the federal (and most states) tax on fuel in done per-gallon, so the argument gets weaker as price rises.

[arderkrag]

Yep. If government would get out of the way of the market, the market would thrive.

[MNJohnnie]

Yeah, “Fact Check” being a Leftist outfit is simply obfuscating to cover up the obvious fact.

State and Federal Taxes pur gallon of gas is $.65 or more in most states.

Oil Companies make $.10 a gallon from a gallon of gas.

[YellowRoseofTx]

As I’ve been hearing on talk radio, the government collects something like 18% of the price of gas in taxes, while the oil companies get to keep 2% in profits. The oil companies do the exploration, drilling, refining, shipping, etc...at their own expense, while the government does absolutely nothing for a much larger profit.

[TYVets]

Yes "the government" makes more than the oil companies.

One point to remember is that no one taxes the government profits.

[Wonder Warthog]

"Can anyone make sense of this?"

Yes. Whoever wrote the article doesn't want to admit that the government DOES make more on gasoline than the oil companies. The numbers in the article prove that. The government take is 13%, and the oil companies profits range from 8.3 to 10.2%. And the so-called point about "after tax" income being lower than "total income" is BS, because the taxes the oil companies pay are just another expense.

[arderkrag]

Also, I have heard (haven’t researched it yet) that Disneyland makes more profits than big oil companies. You don’t see soccer moms screaming about government regulation of ticket prices.

I have pointed this kind of thing out to a few, and they all hit me with the same whiny answer: "But I need gas, I don't need X!" Since when did need drive a price down?

[thackney]

But the excise tax at the gasoline pump is far from the only tax collected by governments in the whole process of getting oil out of the ground and refined and sold as a finished product. Goverment collects at each step of the process.

[Psycho_Bunny]

The very fact that there’s a question of whether or not the government makes more than the companies themselves means the government is taxing too much.

[YellowRoseofTx]

Most oil is drilled for by the government or on government leased lands.

What? Where did you get this information? My husband has worked in the oil fields for years all over the U.S. and none of them have been government owned or leased lands, and the government does not do the drilling.

[kidd]

Not discussed are the costs associated with compliance with government environmental regulations.

A big factor are the extreme restrictions on drilling for domestic oil

[thackney]

Unfortunately, most oil is not produced in the US. We only produce about 6% of the total.

[MNJohnnie]

Not at all true. The truth and facts are all the Rights side. The Left offers nothing to back up their argument but emotion based statements of Opinion presented as “facts” Everyone who bothers to actually thinks about it understands Supply and Demand applies here

http://en.wikipedia.org/wiki/Supply_and_demand

Even Leftist Nancy Pelosie admits that it about Supply and Demand. How else do you justify her current argument?

According to her and the rest of the Obama Democrats, their stopping US Govt from buying 70,00 barrels a day into the US Strategic Reserve “will reduce the price at the pump by as much as $.25”

Ok, then why Democrats and Green Cons, if increasing supply by 70,000 barrels a day is a good thing for Americans, why would not increase supply by 1,000,000 by drilling in ANWR decrease the price by several dollars?

The facts and the truth are all on ONE side in this debate. The problem is the “moderates” are to ghastly afraid of the Left to actually stand up for the truth and thus continually flail around from some sort of phony moral equivalence between the Right and the Left to avoid actually having to stand up for the factsP>