# Urban legend about gas production?
**URL:** https://boards.straightdope.com/t/urban-legend-about-gas-production/452546
**Category:** Factual Questions
**Created:** [June 11, 2008, 6:38am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546 "2008-06-11T06:38:22Z")
**Posts on this page:** 8
**Page:** 1
### Author:  [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)
#### Post date: [June 11, 2008, 6:38am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/1 "2008-06-11T06:38:22Z")
I have heard by a few friends (not usually of the tin-foil brigade) that the reason oil companies have a low profit margin for the gasoline they sell is that they charge themselves a ridiculous amount for the refined gas and can thus charge the gas they sell at the pumps at an inflated cost.
For example, let’s say that Chevron’s refinerary has produced some gasoline at a cost of $2.00 a gallon. They charge the retail division $4.00/gal for the gas which they then sell at a 6% markup of $4.24/gallon. Thus they claim that gasoline only has a 6% profit margin. Of course we need to assume at least a gentlemen’s agreement or collusion between the oil companies about this and if I’m not mistaken, they will sometimes buy gasoline from each other’s refinery (but I could be wrong about this).
Could this conspiracy work?
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### Author:  [@FRDE](https://boards.straightdope.com/u/FRDE)
#### Post date: [June 11, 2008, 8:46am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/2 "2008-06-11T08:46:20Z")
[QUOTE=Saint Cad]
Could this conspiracy work?
[/QUOTE]
Sounds about right - they call production ‘upstream’ and retail ‘downstream’.
Any vertically integrated company/industry can shuffle their profits around.
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### Author:  [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)
#### Post date: [June 11, 2008, 9:05am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/3 "2008-06-11T09:05:27Z")
Not sure where you are assigning this profit; if at the pump, remember that most gas stations are franchised so the retail sale is not the oil company’s profit.
Otherwise, IIRC, companies are not required to disclose on financial statements how much profit came from which divisions or wholly-owned subsidiaries, so I don’t know why it makes any difference to anyone besides the company itself how much profit was from refining and how much from gasoline sales.
Where do you see claims for Chevron’s (or anyone’s) profit margin at the retail level?
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### Author:  [@Tapioca\_Dextrin](https://boards.straightdope.com/u/Tapioca_Dextrin)
#### Post date: [June 11, 2008, 9:19am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/4 "2008-06-11T09:19:21Z")
Oil is what $139 a barrel?
139/42 = $3.31 for a gallon of unrefined crude. Even if building and running a multi billion dollar refinery was completely free and delivery drivers drove their trucks as an act of charity, there’s not that big a markup.
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### Author:  [@Si\_Amigo](https://boards.straightdope.com/u/Si_Amigo)
#### Post date: [June 11, 2008, 11:40am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/5 "2008-06-11T11:40:31Z")
How many gallons of gas do they get from a gallon of crude?
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### Author:  [@MC\_E](https://boards.straightdope.com/u/MC_E)
#### Post date: [June 11, 2008, 11:55am UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/6 "2008-06-11T11:55:05Z")
> [@](#):
>
> One barrel of crude oil, when refined, produces about 20 gallons of finished motor gasoline, and 7 gallons of diesel, as well as other petroleum products. Most of the petroleum products are used to produce energy. For instance, many people across the United States use propane to heat their homes and fuel their cars. Other products made from petroleum include: ink, crayons, bubble gum, dishwashing liquids, deodorant, eyeglasses, records, tires, ammonia, and heart valves.
From: [http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html](http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/oil.html)
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### Author:  [@Ludovic](https://boards.straightdope.com/u/Ludovic)
#### Post date: [June 11, 2008, 12:40pm UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/7 "2008-06-11T12:40:32Z")
[QUOTE=CookingWithGas]
Not sure where you are assigning this profit; if at the pump, remember that most gas stations are franchised so the retail sale is not the oil company’s profit.
[/QUOTE]
Yes, if $4/gal is what they are charging to their franchisees, $4/gal would be what they should charge to their company owned places in order to make it look as transparent as possible.
The math actually sounds about right, rather than conspiratorial, because that really does seem what franchisees/retailers are paying for wholesale gas from my understanding.
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### Author:  [@WarmNPrickly](https://boards.straightdope.com/u/WarmNPrickly)
#### Post date: [June 11, 2008, 1:15pm UTC](https://boards.straightdope.com/t/urban-legend-about-gas-production/452546/8 "2008-06-11T13:15:39Z")
[QUOTE=Si Amigo]
How many gallons of gas do they get from a gallon of crude?
[/QUOTE]
Certainly much less than a gallon, but as has been pointed out, the rest of it gets used to make profit as well.