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.

[cmet]

How can we say the Government does nothing? Where do all the highways come from? Who pays for maintenance of the roads? Maintaining patrols so the roads are safe?

How can we say it is all profit for the government unless we know the cost of building and maintaining the highway system.

If the gas tax is eliminated, it will be replaced by higher taxes somewhere else.

We will always pay until government waste and services are cut

[GulfBreeze]

I’m available for adoption if you are needing children.

[Graycliff]

I meant in the US. sorry

[ferv888]

Check out channel 2 in chicago, Mike Flannery did a story on how southside Chicago folks are coming into Indiana to save 20 cents per gallon from Chicago prices.

Little Eddie Haskell aka Dick Durbin, held up a picture stating Chicago gas highest in nation, what he did not tell you is that there is 79 cents worth of tax in that price, now who is making the money. Blogs, the Governor, stated he was fine with that, as it will bring in about 225mm in extra money.

ferv888

[Graycliff]

( Why do you think that? )

Well after going back and reading what i wrote. It didn’t make much sense, did it? Sorry! Too much coffee this morning.

[PSYCHO-FREEP]

Actually, it has taken 35 years to get here. They have NOT been “easy” years by any stretch. ($10 per barrel was near poverty for most of us.)

The current trend is not looking good for expansion either.

[coffee260]

What does the government produce? Nothing. They confiscate money through taxes. Period. If you want to call public works a form of productivity have at it. But I don’t think what they do with tax dollars, while necessary in many ways, justifies the legal theft of private property. You want to maintain roads and infrastructure? Fine. But when the government does something, including maintenance, they are insufficient and wasteful.

[GOPJ]

Considering that government doesn't find oil, drill for it, refine the stuff, or transport it - yeah, they make the most "profit".

[Paladin2]

Congress is responsible for high crude oil prices ---> high gas and Diesel pump prices.

Complain to your Congress critters.

[TC Rider]

Oil companies make a profit and share it with investors, ie pension funds, mom and pop investors, etc.

Government takes their cut and pisses it away.

[never4get]

PROFITS: Oil Companies-- $75.2 billion dollars Government-- $177.1 billion dollars

That is why our government will do noting to allow drilling. Oil companies make a nice handsome profit for their stock holders, and the government brings in terrific tax revenue....Oh, forgot to mention, many in the government, their family and friends, own oil stock paying the nice dividends, growing in value. No conflict there. The lip service on taxing oil companies, perhaps opening up some drilling, building some refineries will continue, but nothing will be done. The way it stands now, it's a win/win for oil and government. The only losers are the poor schlubs who have to fill up their gas tanks. I suppose I can be a hypocrite, buy oil stocks, and contribute to the destruction of our economy by supporting this nonsense.

[Buffalo Head]

"....gouging...."

Please supply a definition of "gouging" that includes the basic law of supply and demand doesn't includes some twisted, self-serving concept of "fairness".

[Steve Van Doorn]

Thank you!

I was looking for that information.

[Dr. Sivana]

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.

I was referring to the Middle East, Venezuela, etc.

I was shocked when I found out that when you "own" land in Canada, the GOVERNMENT retains mineral rights. I know someone in Alberta who owns a quarter section. Oil was thought to be in the quarter-section. The government sells a license to an oil company to go get it. The LAND OWNER does NOT get a cut. Oh, they'll pay him a fee for the right to put a rig there, and any improvements to the land (e.g. bridges) stay with the land when the oil is done, but the compensation is roughly equivalent to the property taxes on the land (big whoop). I asked him what would happen if he told them it wasn't worth it. He told me that they would just go on an adajacent piece of land and grab the oil out from under him.

Jed Clampett could never happen in Canada.

[dbacks]

[We waited in line for gasoline. We got into fist fights when some A$$ hole tried to get in the front of the line.]

Yes, and those of us in Arizona were screwed because the allocation was based on the census population (1970) figures. The actual population has risen by a HUGE percentage and that did NOT include the winter visitors (snowbirds) who swell the numbers by dozens of thousands.

A friend of mine owned a gas station in the snowbird area. He had lines stretching as long as 1/4 mile. He pumped gas into a a lady from the ‘blue-haired, bloody mary’ crowd and commented that he thought he had seen her earlier in the day.

She replied, “Yes but I went to the store across the street and wanted to make sure I was full!”

He shut down the station and never reopened. Turned it into a garage.

[arderkrag]

That said, I believe it to be none of government’s business meddling into determining what ROI any industry deserves, so long as there’s not gouging or price fixing.

It's not their business period, regardless of so-called "gouging". Gas is a product. If I want to jack up the price to $10 a gallon, it's not the government's business.

[GreenAccord]

Price fixing, as defined when all competitors conspire to set a price that does not represent what the true market would be (which I cannot give an example of ever happening) should be governed. As for gouging, it is well-accepted that in times of natural disaster, companies are under the watchful eye of government (at all levels) for repair work and resources.

Note that I am definitely not saying that oil companies are engaging in any of the above.

[arderkrag]

Price fixing, as defined when all competitors conspire to set a price that does not represent what the true market would be (which I cannot give an example of ever happening) should be governed.

It should be completely and utterly legal to engage in "price fixing". If the companies can make a deal like that amongst themselves, so be it, let them. It is not government's place to regulate markets.

As for gouging, it is well-accepted that in times of natural disaster, companies are under the watchful eye of government (at all levels) for repair work and resources.

It doesn't matter that it's well-accepted. Government regulation of markets is wrong, period.

[arderkrag]

Moreover, during times of natural disaster, companies should be able to make any amount of money they can off the disaster.

[YellowRoseofTx]

I was shocked when I found out that when you "own" land in Canada, the GOVERNMENT retains mineral rights. I know someone in Alberta who owns a quarter section. Oil was thought to be in the quarter-section. The government sells a license to an oil company to go get it. The LAND OWNER does NOT get a cut. Oh, they'll pay him a fee for the right to put a rig there, and any improvements to the land (e.g. bridges) stay with the land when the oil is done, but the compensation is roughly equivalent to the property taxes on the land (big whoop). I asked him what would happen if he told them it wasn't worth it. He told me that they would just go on an adajacent piece of land and grab the oil out from under him.

It's the same here in the states. We get royalty checks monthly from just this kind of situation. We own the land, the oil companies drilled, we get a small percentage. If we declined their offer, they would just go to another section close by and drill there to get to the oil on our land.