Big Oil Err Government
I’ve been having a bit of fun with congress’ little dog and pony show about how those evil oil companies make all that evil money while the little guy has to shell out $3 for gas. Oops:
Oil company profits — 643 billion
Tax revenue collected by the Government on gasoline — 1.34 trillion.
The oil companies making that much is supposedly bad, says congress. But the .gov making more than twice that is fine and dandy. But the oil companies are evil! say the hippies.
Let’s do some more math! And we’ll use simple numbers and some estimates. The federal tax on gas is 18.4 cents. And that’s pure profit. Based on that, I figure a good SWAG puts big oil’s margin at about 8.8 cents per gallon of gas or (assuming $3 per gallon) a profit margin at about 2.6%. Those evil bastards making pennies per gallon! (and you might want to check my math. I’ve only had one cup of coffee and was pretty loose with my assumptions).
Bear in mind that big oil probably makes more money selling you chips, beer, smokes, and ice cold Coca Cola than it does on gas.
April 8th, 2008 at 9:36 am
The gas station owners are always subject scorn as well despite not having any control over prices (unless the station is independently owned which is a rarity). The owner of a station only gets paid a ‘per gallon’ fee, so what they make is the same if gas is 1.00 a gallon or 3.00 a gallon.
The really big bucks are made when gas prices are going down. That’s when there’s a huge spread between the wholesale price and retail price. The refineries clean up at that point.
April 8th, 2008 at 1:58 pm
Many stations, even chain stations, sell on consignment.
If a price drop happens to compete with the chain across the street and you’re still selling last week’s gas…
Whoops! $.02/gal loss ’til the next truck rolls in. Sorry ’bout that.
April 9th, 2008 at 12:02 am
Yep. Station owners generally get about $0.06 per gallon, regardless of the underlying price per gallon. Its why so many convenience stores have opened up .
The other odd thing, which the Tam and Jay alluded to is how the price is set – which is based upon the expected cost to replace the fuel in the tanks, not the price that was paid. So indeed, there.
Of course, big ethanol has been a HUGE boom to big oil They get a $0.51 per gallon tax credit (read – SUBSIDY) for each gallon of ethanol they blend into gasoline. Right now, they are using about 7.5 BILLION gallons of gas. Nancy Pelosi and her stooges just increased that mandate to 36 BILLION GALLONS . . . and have not gotten rid of the tax credit. In truth, it expires in 2010 but they will likely extend it to 2015 and drop it to a paltry $0.46 per gallon. In 2015, the mandate will be 15 billion gallons. . . . . you can do the math on whether Nancy Pelosi and the Democrats are serious when they criticize big oil for receiving too much in the way of tax credits and subsidies.
April 9th, 2008 at 12:03 am
btw, in the interest of full disclosure, in real life I represent folks who are in the middle of the ethanol debate. Not telling who, only that I am involved and my bias speaks for itself.