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.

[Robert A Cook PE]

BUT ...

Medicare taxes need to be added.
State income taxes included?
Social Security taxes on each employee are part of the tax burden: Whether at 7% each salary or 14% (total cost) could be debated.

[Graycliff]

Yep! I noticed the state severance tax’s were not included. That amounts to over 6 dollars a barrel here in TX.

[pgkdan]

Gov't earns nothing. They just stand there with their hands out.

yep. The only thing the gov't has earned is contempt.

[goodwithagun]

If your an investor, just tell them you own enough shares of ExxonMobile to off-set the cost of gas. I often tell my fellow publik scewl teechurz that filling up my Titan is like putting money in my savings account. Not exactly true, but it pisses off the hillary/hussein supports something fierce!

[goodwithagun]

If your an investor, just tell them you own enough shares of ExxonMobile to off-set the cost of gas. I often tell my fellow publik scewl teechurz that filling up my Titan is like putting money in my savings account. Not exactly true, but it pisses off the hillary/hussein supports something fierce!

[Graycliff]

Yep! I know of no government owned or operated drilling rig.

[thackney]

In the US, but around the world, many are government owned. Saudi Aramco is a government entity.

[skinkinthegrass]

I'll try, too.....

....seems like everybody is "feelin' the pinch"....except, the Enviro-Terrorists and the Demoncrats....there's NO difference, between these to groups....

[coffee260]

UGGHH!

[Graycliff]

I was speaking only in the US. Sorry!

But since thats been brought up, I’d be willing to bet that If all production within US boarder did belong to the government, there would be no restrictions on drilling.

[numberonepal]

They just stand there with their hands out

They just stand there with their hands out guns pointed at you. Fixed it for ya.

[skinkinthegrass]

For those of you too young to remember the 70's here is a refresher course....

I remember....G*D Damn, Frm. Pres. Jimmah "Malaise / Energy Brown Shirts" Carter...

[numberonepal]

while the government does absolutely nothing for a much larger profit.

Oh they do plenty in the way of threatening the loss of life and liberty should you not comply with their wishes.

[TYVets]

I am glad the government was not smart enough to enact a tax based on the price and not a fixed amount per gallon.

Say if the government had imposed a 10% tax instead of a 18 cent per gallon tax, the government would be rolling in the dough.

I believe The City of Chicago and Cook County both collect taxes on a percentage basis.

A day or two ago I read that the price of gasoline in Chicago is the highest in the US.

Of course Chicago has to have high corruption taxes to feed all those who feed a the public trough.

[thackney]

Why do you think that? Most of the most promising areas of petroleum reserves are held out of production because they are federally owned land/waters. The government is the one that would collect the royalties on this oil if they did allow it to be produced.

[skinkinthegrass]

For those of you too young to remember the 70's here is a refresher course....

I remember....G*D Damn, Frm. Pres. Jimmah "Malaise / Energy Brown Shirts Sweater" Carter...

[GulfBreeze]

I would imagine the amount of money the various employees who work for the oil company are paying all together in taxes would be another astronomical figure.

[Nailbiter]

ping

[willyd]

Check out Pemex

[PSYCHO-FREEP]

You are correct about that, what I pay in taxes is equal to the average annual income in the Mid-West.