When gas prices were over $4.00 per gallon, almost everybody was cursing the oil companies for their excessive profits. Many people argued that the oil companies were colluding to keep oil prices high.
Liberal groups were calling for investigations and even regulation.
So where are these people now that gas prices could dip below $2.00?
There are certain fixed costs in producing a gallon of gasoline. The cost of oil is the biggest expense. If oil companies have to pay more for oil, the price of oil-related products will go up. Profits are necessary to keep oil flowing. If there’s no money – profits – to explore, drill, and transport oil, we all suffer.
Many people also forget that there is no single person who owns an oil company. There are millions of investors. Anybody who has a retirement account of any sort most likely is receiving oil money profits.
Here’s one item that almost nobody wants to bring up. While the price of gasoline is down, as well as profits, taxes on each gallon of gasoline have stayed the same except in those states like Georgia where gas taxes are calculated on a percentage basis.
“Subtracting state and federal taxes and fees on gasoline, the price of a gallon of gas would fall below $2 in 29 states, according to data published by the American Petroleum Institute in October 2014, and by AAA. AAA said the national average for gas dropped to $2.394 per gallon on Dec. 22. while the average state and federal gas taxes and fees averaged a whopping 49.28 cents-per-gallon, or more than 20 percent of the total price. Those gas taxes, which are hidden by being incorporated into the pump price of gasoline, also went unmentioned by the broadcast network evening shows from Sept. 29 to Dec. 21.”
Consider that when a gallon of gasoline hits $2.00 at the pump, nearly 25 cents of that price is in taxes.
So what’s the oil companies’ profit on a gallon of gasoline? Consider this from Exxon Mobil’s Perspective Blog : “For every gallon of gasoline, diesel or finished products we manufactured and sold in the United States in the last three months of 2010, we earned a little more than 2 cents per gallon. That’s not a typo. Two cents.”
The various governments make nearly 50 cents per gallon with no risk or effort. They simply pass a law and force the gasoline companies to collect the tax.
Oil companies are governed by market forces. When the price of oil dropped, they passed on the lower prices to consumers.
So the next time you are tempted to blame the oil companies for the high price of fuel, consider that the government is making 25 times the profit, and when gas prices fall, the amount of tax you and I are paying does not.
Like clockwork, the big government types believe now is the time to raise the gas tax, because consumers, Howard Gleckman, a Forbes contributor and a resident fellow at The Urban Institute, argues, “would barely notice if they had to pay a bit more now at the pump.”
Just what politicians need – more of our tax dollars to waste and grow the government.