Who gets richest off gas prices? The government

Drew Johnson's picture

While the average price of gas in America hovers around $3.50 per gallon for regular unleaded, it costs more than $50 to fill a typical car’s 15-gallon tank.

But why does gas cost so much?

You may blame high gas prices on rich oil company executives or greedy gas station owners. But the truth is, governments rake in a larger profit than anyone at the pump — and with gas taxes on the rise in many parts of the country, there’s no relief in sight.

The price of a gallon of gas is based on the combined cost of four different expenses: the price of crude oil, the cost of refining/manufacturing gas, distribution and marketing expenses, and the amount of taxes levied on gasoline.

Oil costs comprise about 76 percent of the cost of gasoline, according to U.S. Energy Information Administration (EIA). That means $2.66 of a $3.50 gallon of gasoline is set before the oil is even refined and turned into gas.

Global markets, reacting to supply and demand, determine the cost of crude oil. Just like any commodity, from gold to corn, a shortage in supply or an increase in demand leads to a rise in prices.

Refining oil to manufacture gas is the next step in the process — and the next expense for drivers. During the refining process, gasoline is extracted from crude oil, and additives, including lubricants and detergents to reduce engine deposits, are added. As of January 2012, the EIA found that the refining process was responsible for six percent of the cost of gas.

Distribution and marketing — the part of the process most apparent to consumers — constitutes another six percent of gas prices. That portion of the cost includes the shipping and transportation of the gasoline, a markup to cover retailers’ expenses, and any advertising done to appeal to customers.

The remaining 12 percent — or almost 50 cents per gallon — goes directly to federal, state and even local governments in an array of sales and excise taxes.

The federal gas tax is 18.4 cents on every gallon of gasoline sold in America. State gas tax rates vary from a low of 8 cents per gallon in Alaska to a jarring 49 cents per gallon in New York. Other states where it’s steep to fill up include California and Connecticut — each with 48.6 cent per gallon state gas taxes — and Hawaii at 47.1 cents per gallon.

Some local governments have gotten in on the gas tax act, too.

California’s local sales and excise taxes on gasoline average 3.1 percent, according to the Los Angeles Times. That works out to about 12 cents in local taxes for each gallon of gas, based on the state’s $3.80 a gallon average.

Skokie, a suburb north of Chicago, levies a three cent per gallon gas tax. You’ll pay an extra nickel per gallon at gas stations in Eugene, Oregon. And the next time you’re in Las Vegas, don’t spend all your money at the casinos. You’ll need to have plenty of cash left over to cover Clark County’s budget-busting 10 cent local tax on a gallon of gas.

Florida Today reports that Brevard County — the Florida county home to the Kennedy Space Center — expects to siphon more than $15 million from motorists this year.

Believe it or not, government makes far more from gas sales than all of the oil companies put together.

ExxonMobil for example, made only seven cents per gallon of gasoline in 2011. That’s just a drop in the bucket compared to the nearly 50 cents per gallon that federal, state and local governments rake in one an average gallon of gas pumped in the United States.

Gas taxes are particularly unfair because they hit the poorest people the hardest. Most people have to drive, whether to work, to the grocery store, to pick up kids from school or any of the dozens of other reasons we pull out of the driveway each day.

These responsibilities don’t change whether you make $25,000 or $250,000 each year. The only difference is for someone struggling to make ends meet, paying 50 cents per gallon in taxes, may be the difference between driving to work and putting dinner on the table.

The next time you begin to blame oil companies, speculators or service stations for high gas prices, remember, no one get richer off of gasoline than government.

[Drew Johnson is a senior fellow at the Taxpayers Protection Alliance (TPA), a nonpartisan, nonprofit educational organization dedicated to a smaller, more responsible government. Visit TPA online at www.protectingtaxpayers.org.]

Ridges23
Ridges23's picture
Offline
Joined: 05/12/2012
I made a mistake...

Although I disagreed with the premise of the article, it was worth my effort to respond with a different view. I now see that this thread and this entire blog is not about exchanging ideas, it is about assigning blame, mainly at the government and specifically at the current administration. Their is no blame to pass around other than purely partisan politics and I choose not to have that discussion with folks that are dug in their corner and will not listen or accept others opinion as valid, both sides of the aisle.

S. Lindsey
S. Lindsey's picture
Offline
Joined: 12/31/2008
Ridge blogging isn't "Fair"

Yours, mine and everyone's opinion is open to arguments and counter arguments.
If you wish to just state your opinion and not have your opinion challenged then this is probably not the forum for you, however if you wish to discuss ideas yes be told/shown you may be wrong or prove you are right this is the right place.

Here this might help... Points and Counter-Points

You have to understand your opinion is not the only opinion on the subject. If you cannot defend your opinion then how firmly do you really hold that opinion?
By arguing here, your opinion, you might find that you might be looking at the subject from a biased viewpoint or you might re-affirm your belief.

BUT by just saying everyone is wrong but you and you will not participate simply shows you hold a ridged philosophy/ideology and will not entertain new ideas.

Is this where you really want to be?

Robert W. Morgan
Robert W. Morgan's picture
Offline
Joined: 10/26/2005
Good analysis on gas prices. Got a couple of ideas though.

First of all, since there appears to be a state or federal law that gas prices be displayed prominently, why not insist that the taxes charged on each gallon be shown on some easy-to-understand chart next to the pump. That way you have something to read while the gas is pumping and you can easily understand that the government just took $10 or whatever out of your pocket. Highlighting the amount of those special local taxes would be a good thing as well, although I am sure they get justified as taking from the high number of tourists which is usually considered fair game. BTW, I wonder how many people know these taxes are deductible on your income tax return. It adds up. If you commute to Atlanta and fill up twice a week, the taxes alone will be over $1,000 per year.

Secondly, as Prezbo's Cabinet level officer, the Secretary of Fairness, is almost certain to suggest - should the rich pay higher gas taxes? Especially since they drive those expensive cars? The gas guzzler tax isn't enough, besides that's just a one-time thing. We need a scanner at the pump that calculates the value of your car and if it is above $40,000, you get a 10% surcharge added to each gallon you buy. It is only fair that you pay your fair share. I mean at some point you have spent enough money on a car and should give back. Doncha agree?

Ridges23
Ridges23's picture
Offline
Joined: 05/12/2012
Gas prices and getting rich

REALLY!!! I have not done the required research to combat every point you make but the limited research I have done does not lead to the conclusion you came to in this article. First, even if the number you present as the gas companies profit margin is correct, how do these companies continue to report record profits year after year and the tax the federal government receives can not pay for the road and bridge construction and upkeep? It would seem that if they collect only 7cent and the federal government collects 18.4 cents then the government should be awash with money. The rest of the government should be able to borrow money from this tax collection and solve all of our financial problems.

Again, I will not spend hours on end researching every angle of this topic and I will not completely tear down the effort you put into this, but if you were trying to be completely fair about the conversation, I do not think you would have presented it as another "look at what the government is taking from you" type of article.

Lastly, the mere name of your organization reeks of partisan politics at is worst and although I don't agree with the article or its premise, I would like to thank you for your participation is our way of life.

WakeUp
WakeUp's picture
Offline
Joined: 03/14/2006
Gas prices and getting rich??

Your logic is biased. The oil companies are more efficient with the $0.07 than the government is with their $0.18. Why? The oil companies are "for profit" organizations while the government is a "for give away" entity. Sure, if the government was efficient and answered to a Board of Directors and stockholders, then they could get a lot more done with what they have.

kcchiefandy
kcchiefandy's picture
Offline
Joined: 09/18/2009
Should be an axiom, WakeUp...

...that business is ALWAYS more efficent than government; very good point. Just check and see how well the USPS is doing compared to UPS, FedEx, etc...! But, as you mentioned, you can't redirect income to other programs/areas if you're a business...well, unless you're using it to IMPROVE your business; NOT going to happen w/ ANY government!

S. Lindsey
S. Lindsey's picture
Offline
Joined: 12/31/2008
Well now we are back to "Big" Oil aren't we...
Ridges23 wrote:

REALLY!!! I have not done the required research to combat every point you make but the limited research I have done does not lead to the conclusion you came to in this article.

Well wouldn't that very statement not suggest you need to do more? You admit you did little research and thus know very little other then maybe preconceived notions so maybe a reasoned and researched argument can be presented IF you do the work?

Ridges23 wrote:

First, even if the number you present as the gas companies profit margin is correct, how do these companies continue to report record profits year after year and the tax the federal government receives can not pay for the road and bridge construction and upkeep?

Well first if you checked IRS.Gov, Forbes et.al. you would have found the numbers are fairly accurate. You would also have found that they Oil Industry is the single largest contributor to the tax base.
Now Ridge you asked why is it not enough?
I ask you how is it the fault of the Oil Industry if Government takes that revenue and uses it on things OTHER THAN roads and bridges? Let me give you a small lesson in Free Market Economics.

I sell a widget for $1.00. My profit margin is $0.01 per widget.

My Competitor sales a widget for $2.00 and their profit margin is $1.01 per widget.

Now I sell a Billion widgets World wide and my competitor sells a Million.

I made a $100,000 Million in profit and they only made a Million. Why was my profit so much greater? Was I GREEDY? Did I steal sometime from someone?

Nope I just sold more of my product then they did. That's Free Market Economics.

Just because the Oil Companies make a huge profit is nothing neferious they just sell a LOT of their product.

Ridges23 wrote:

It would seem that if they collect only 7cent and the federal government collects 18.4 cents then the government should be awash with money. The rest of the government should be able to borrow money from this tax collection and solve all of our financial problems.

Again I ask how is it that the Oil Companies are responsible for the spending of Government? Ridge you seem to somehow think it is the Oil Companies responsibility to govern Government.
btw- we are awash in Money in Government they just spend more then they take in...

Ridges23 wrote:

Again, I will not spend hours on end researching every angle of this topic and I will not completely tear down the effort you put into this, but if you were trying to be completely fair about the conversation, I do not think you would have presented it as another "look at what the government is taking from you" type of article.

Well you should because you are using emotion not logic to come to your conclusions and again why does the writer have to be fair. You seem to place a lot of responsibility and accountability on the "other" guy. You disagree with the writer then argue their points..not ask for "fairness".

Ridges23 wrote:

Lastly, the mere name of your organization reeks of partisan politics at is worst and although I don't agree with the article or its premise, I would like to thank you for your participation is our way of life.

Well here I would just say "Judging Books" and all that. Ridge you obviously have an ideology. Great so do I. You have an Opinion. Great so do I. However Ridge if you wish to opine a different conclusion then simply saying "You are wrong" is not enough.

So now it's my turn.

Ridge.. Does the Oil Companies get subsidies from the Federal Government?