I found this interesting claim over on Exxon’s website that the government* makes more from each dollar of gas sales than the petroleum industries.
I’m extremely skeptical, given the source, but so far the only shifty thing I can come up with is comparing the aggregated the .gov portion against the individual industries in the supply chain (crude extraction and shipping, refinement, retail sales, etc.). Still, that means we’re paying more in taxes on gas than we are for the gas itself.
They’re saying that the taxes exceed their profit, not their revenue, which is probably correct; but it ignores the fact that the government has costs that offset revenue too (although they’re not easily allocated for something like this).
This page breaks down the price of a gallon gas into its individual parts. (Note that it’s based on California taxes, which are the highest gas taxes in the country.)
The claim looks correct to me. I think you’re just misapplying the meaning.
The number does NOT mean that we pay more for tax than for gas. All it means is that a $3.00 gallon of gas is $0.50 of tax revenue and $0.08 of net income for Exxon. You’ve still paid $2.50/gallon for gas aside from the taxes, but a portion of that revenue goes to the gas station owner, the transportation, the refining, the drilling, the mineral rights, etc. etc. Of the $2.50, only $0.08 is left as net profits for Exxon.
As has been pointed out, Exxon factors in their costs, but doesn’t factor in government costs. As Chronos points out, Exxon’s costs are all profits or wages to someone and so when you boil it down, it’s actually quite meaningless. All it means is that commodity producers and wholesalers have thin profit margins. In the business world, that’s a little bit like the revelation that it’s colder in New York than in Florida.
And moreso, that price breakdown treats crude oil as a cost… and given the relationship of oil companies and refineries, coupled with subsidies and cheap mineral rights, it’s probably impossible to allocate the real profit. It is, however, almost certainly higher than what’s based on that monolithic cost.
The one about the “government* makes more from each dollar of gas sales than the petroleum industries”? From the OP by dstarfire.
Or the one about “In the UK about 60% of fuel cost at the pump is duty and value added tax”?
Originally Posted by Mr. Kobayashi.
Please be specific. I am fairly sure that the quote by dstarfire is true.
As to the other, I do not know the percentages, but I would guess that the taxes in the USA are at about 20% not 60%. Thus, I guess that it is untrue in the USA that the taxes and duty are about the 60% of the price.
Is this what you are saying? Thanks for the reply in advance! 48.
I am not making any very specific claim. I am just saying that, however you interpret the original claim (as others in the thread have shown, there are several ways to do so, and thus to make it come out true or false), there is a considerable likelihood that your answer might be different in the United States, where taxes are comparatively light, and elsewhere in the world where they are much heavier.
Even though there may be interpretations of the actual facts under which the original claim comes out as true, it is clearly really bullshit propagandist spin designed to mislead. It is meant to make you feel sorry for the poor, oppressed oil companies and deflect any anger you may feel about gas prices onto the greedy government that takes most of their hard earned money. Poor dears!
But its absurd to talk about profit to the oil driller only.
What is the profit to the oil tanker fleet ? the refinery ? the pipeline company ? and the gas station distibribution and sales unit ? And if Exxon doesn’t own any significant percentage of the other layers … well of course they do
Dividing it into 20 levels and then saying “no part earns more than 10%” is just saying that they divided the oil industry into so many levels !
There’s also the issue for that crude oil taken within US territory, we/the government own it to begin with, so any subsidized price or cost basis less than par means that lowered cost is part of the oil company’s profit.
When you talk about how much money the government “makes” you also have to keep in mind that the government pays for the roads where the vehicles drive that consume the gasoline. The more gas that gets sold, the more wear and tear there is on the roads, and the more that the government has to spend just to break even on the deal. It ain’t all profit for Uncle Sam’s pockets.
I searched fairly briefly and dug up some numbers from 2007 (if someone wants to take more time than I did you can probably find more recent data). According to those numbers, about 60 percent of the tax money collected goes directly into the construction and maintenance of roads and bridges. The remaining 40 percent goes into specialty programs. Many of these specialty programs are state run construction and maintenance programs for roads and bridges, but these programs also include things like bike trails and lighthouse maintenance (according to a 2007 interview with Secretary of Transportation Mary Peter).
You can argue whether some of these programs should be funded by fuel taxes, but as for the overall “profit” that just goes back into the U.S. budget for other stuff, there doesn’t seem to be any. All of the fuel taxes go to programs either directly or indirectly paid for by the U.S. Department of Transportation.
I don’t think it is so absurd. Lots of people tend to think that Exxon is directly gouging them at the pump. They don’t stop and think “Hey, this gas station gets a lot of the revenue, and it’s owned by a local family with kids in the same class as my kids. And I play poker with the guy who works six months a year on an oil rig.” Instead, they tend to think “Those evil corporations are taking all of my money!”
Lots of people also have very little idea how much gas is taxed. You can tell, because Americans wander around crying about how high our gas taxes are… when most of the world is paying far, far more for gas taxes.
In any event, I noticed you didn’t quote me when I said “…it’s actually quite meaningless. All it means is that commodity producers and wholesalers have thin profit margins. In the business world, that’s a little bit like the revelation that it’s colder in New York than in Florida.” So if you read my whole post, you’ll see that we’re basically in agreement.
One thing that makes the oil companies unique, though, is that when prices DO go up they’re usually the ones making the extra profit. Most of the other players who are wetting their beak with that gallon of gas are doing so for a relatively fixed per gallon amount. Most of the time, the price of crude is what drives the price of gas. When market fluctuations cause the price of crude to go up, the oil company’s operating costs don’t really go up (at least in the short term), but their revenue does.
So they might be making a small amount of profit per gallon of gas when prices are stable, but when some sort of market issue sends them up (which is when people complain about gouging), the oil companies are indeed making MUCH more profit off a gallon of gas. Of course, it cuts the other way too and so when prices are low (like when they were in the low $2 range for a short time in 2008), they may be operating at a loss.
Do you know what the margin on a gallon of gas is for an independent seller? It’s around 8-12 cents a gallon, or under 3%.
So a merchant that sells 10,000 gallons of gas makes $1000 on that sale, gross, from sales of about $350k. Hardly a lot against business expenses, raising kids and losing at poker.
With a margin of 3p or so a gallon, owning a forecourt in the UK is no route to wealth. Many of them make hardly any profit at all on the fuel, but use that to attract customers in to the more profitable retail area.
Supermarkets are generally the cheapest, and have over 15% of the market here. Everywhere you go there are ex petrol stations, either empty or turned over to some other product. On a three mile drive into town, I pass two.
I have honestly never understood this statement. Why in the world should we as Americans care what people in other countries pay in taxes on their gas? I hear in Venezuela they pay something like 10 cents a gallon for gas. Shouldn’t we be using that as a basis for comparison?
I’m really sorry that those living in Europe have to pay such a tax, but that’s what you get when you want big government. But I fail to see why any American would try to imply that we’re spoiled or have to be sorry of our advantage because we aren’t getting fleeced as much as others. It really isn’t necessary for the USA to have to suffer as others do, just so some in our society don’t feel guilty.
Btw, I’m not implying that you feel this way (maybe you do, I don’t know), but I’ve heard people use this argument for years. I say, if we have it better than others, good for us.
