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]

“What does the government produce? Nothing. They confiscate money through taxes.........”

I will agree that the government is very wasteful in what they do. But to say that they do nothing? You have got to be kidding ... try to get from Memphis to Atlanta with out using a government built road. As much as i hate to admit it myself there are many things that the government does for us. If they are wasteful in doing it.. that is another problem in itself.

And even if they were to eliminate the fuel taxes.. congress is going to spend the same amount of money and they in some form or another are going to get it from you. At least with a fuel tax, the people using the service are the ones paying for it

[GreenAccord]

You sound like a tried and true libertarian. I, as a conservative understand there’s a role to be played by government (albeit a very limited role) in the regulation of markets. You & I don’t live in a country where there’s zero involvement by government in the markets.

[arderkrag]

If you believe in government control of markets, you are not a conservative. And it really doesn’t matter whether we do or not, what matters is the way things should be.

[GreenAccord]

Classic strawman. I use the phrase ‘government regulation’, you say I believe in ‘government control’. You never saw me use the word control at any point.

[WOBBLY BOB]

[MNJohnnie]

Thank you! I cannot access my copy of that cause I am at work. That is a great graphic. If I stole it from you, thanks for finding it!

[Vinnie]

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

North Carolina enacted exactly that last year. And several other States do also.
NC checks the price/gal. twice a year and adjusts the tax accordingly.

[arderkrag]

Regulation is control.

[GreenAccord]

I respectfully disagree. Regulation is the process of keeping someone from doing something. Control is the process of making someone do something.

It’s akin to Grace and Mercy. Grace is giving you something you don’t deserve. Mercy is not giving you something you deserve.

[Vinnie]

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.

I understand land, mineral rights, etc.

My question,
With this new potential field found in the Dakotas, why can't the Oil Co.s drill on private land and develop the field, whether Congress likes it or not?

[arderkrag]

Regulation is the process of keeping someone from doing something.

You're making a semantical argument where there is no notable difference. "Keeping someone from doing something" is control, plain and simple. The government should not regulate (control) any market.

[thackney]

The Bakken field in North Dakota is being drilled. It is the reasons that oil production is going up in N.D. when most other states are going down.

http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm

[thackney]

Regulation is the process of keeping someone from doing something. Control is the process of making someone do something.

Most would disagree with this definition.

Usually, when someone complains someone else is NOT controlling their kids, they are not preventing the kids current actions.

[GreenAccord]

The government should not regulate (control) any market.

This is where you and I (obviously) disagree. For example: The FDA is responsible for regulation of (in this example) the handling, processing and sale of meat. That is in no way control, as you put it. The FDA doesn't get to tell anyone what they can charge. Their interest is in consumer protection. In your regulation-less world, I suppose you leave that to the free market, where retailers are left to be hammered by the wiles of consumers in a supply and demand mechanism to 'punish' the retailer for not doing it right.

[arderkrag]

In your regulation-less world, I suppose you leave that to the free market, where retailers are left to be hammered by the wiles of consumers in a supply and demand mechanism to 'punish' the retailer for not doing it right.

Yep. It should all be left to the free market.

[YellowRoseofTx]

With this new potential field found in the Dakotas, why can't the Oil Co.s drill on private land and develop the field, whether Congress likes it or not?

I question that also. I don't understand the hold congress has on this, other than like OSHA, etc. I don't understand why they can't drill off the coast either. Alaska is begging for drilling there, but what ever the hold is, congress has the say.

[Gondring]

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.

The article makes that point.

[Gondring]

Many people in the US don’t own the mineral rights on their property.

[GreenAccord]

I think the word 'regulation' is poorly adapted to parenting. Indeed, as a parent, I agree it's about controlling your kids, no matter the situation, and I wouldn't naturally say that I was regulating them.

But in my discussion with arderkrag, I was contextually differentiating control and regulation in the government context. And I would still stand by the definition of regulation as I posed it in a more general sense. I was differentiating the two words, control and regulate, the former being more about making something happen, versus reacting to a set of existing circumstances.

I suppose synonyms for either word would serve this purpose. Control/manipulate, regulate/ fix.

[Dr. Sivana]

Many people in the US don’t own the mineral rights on their property.

Does the government own them? What are the circumstances that preclude it? (state law, EPA regs, zoning? 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. Its more of an assignable usage license, like software. I fear we are going in that direction.