Tag Archives: Big Oil

Who really gets rich from gasoline? Big oil companies or big government?

Here’s a great article that will blow your mind from the Wall Street Journal. (H/T Tom)

Excerpt:

With the average price of gas in America hovering around $3.50 per gallon for regular unleaded, it costs more than $50 to fill a typical car’s 15-gallon tank this summer. Why does gas cost so much?

You may blame high gas prices on rich oil company executives or greedy gas station owners. The truth is that governments rake in a larger profit at the pump than anyone—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 combination of four costs: that of crude oil, of refining gas, of distribution and marketing, and of taxes.

Crude oil costs make up about 76% of the cost of gasoline, according to U.S. Energy Information Administration (EIA). Thus $2.66 of a $3.50 gallon of gasoline is set before the oil is even refined. 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 is the next step in the process—and the next expense for drivers. 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 refining was responsible for 6% of the cost of gasoline.

Distribution and marketing—the part of the process most apparent to consumers—constitutes another 6% 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 created to appeal to customers.

The remaining 12%—or almost 50 cents per gallon today—goes directly to federal, state and 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 eight 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 gas taxes—and Hawaii, at 47.1 cents per gallon.

Some local governments have gotten in on the act, too. In California, local sales and excise taxes on gasoline average 3.1%, 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 current average of $3.80 per gallon.

[…]Exxon, for example, made only seven cents per gallon of gasoline in 2011. That’s a drop in the bucket compared to the nearly 50 cents per gallon that federal, state and local governments rake in on an average gallon of gas pumped in the U.S.

That’s not going to stop the unproductive socialists in government for accusing oil companies of being greedy. Who’s really greedy? Government is greedy. They take more of your money in gas taxes than the oil companies do.

Gas prices hit all-time high – again – in Obama-supporting California

From liberal USA Today.

Excerpt:

Gasoline prices in California rose to another all-time high on Sunday after passing a four-year high a day earlier, according to AAA.

The four-cent-per-gallon jump Sunday was even bigger than Saturday’s jump, which was just a fraction of a penny.

AAA reported in its latest update on Sunday that the statewide average price for a gallon of regular unleaded gasoline is $4.655. Saturday’s average of $4.6140 was the highest since June 19, 2008, when it was $4.6096.

Sunday’s price, like Saturday’s, was the highest in the nation, with the Golden State leapfrogging Hawaii this week as the state with the most expensive fuel due to a temporary reduction in supply.

Californians are paying 24 cents per gallon more than motorists in Hawaii, according to the AAA report. In some locations, fuming motorists paid $5 or more per gallon while station owners had to shut down pumps in others.

[…]A web of refinery and transmission problems is to blame, analysts said. The situation is compounded by a California pollution law that requires a special blend of cleaner-burning gasoline from April to October, said Denton Cinquegrana, executive editor of the Oil Price Information Service, which helps AAA compile its price survey.

The radically leftist New York Times explains why this is happening:

Excerpt:

California typically has substantially higher gasoline prices than most of the country because of its tough environmental regulations and high taxes. Gasoline supplies are traditionally tight this time of year as refiners do maintenance work to switch from summer to fall gasoline blends mandated by the California pollution-reduction regulations. But this year, energy experts say, the local gasoline market is particularly chaotic because of the refinery shutdowns.

[…]“California requires a specific blend of gasoline that only the refineries on the West Coast make,” said Bill Day, a spokesman for Valero. “So when there is a shortage of that blend, you can’t just send supplies from somewhere else.”

Wow, even a stopped clock is right twice a day.

Here’s a more full explanation from Ken Green of the American Enterprise Institute. (links removed)

First reason is limited supply with higher demand, which has been made worse by Obama:

The primary reason for high gasoline prices, as any economist will tell you, is very simple: world demand for oil is strong, and the supply is limited. The cost of crude oil dominates the price of gas: in January 2012, it represented 76 percent of the price.

Second reason is Middle East tensions, which has been made worse by Obama:

Risk also influences the world price of oil. Unrest in the Middle East is a perennial cause of worry over world oil supplies, and explicit threats by Iran to close the Straits of Hormuz can’t be promoting confidence in oil consumer markets.

Third reason is blocking domestic energy production, which has been made worse by Obama:

Another source of supply uncertainty is the moratorium that the Obama administration has slapped on U.S. development of domestic oil production in the last two years. Since the Deepwater Horizonoil rig disaster in 2010, U.S. domestic oil production has slowed significantly, especially in the Gulf of Mexico. The permitting slowdown as a result of the spill is estimated to have cost the United States $4.4 billion in output costs, 19,000 jobs, $1.1 billion in wages, and over $500 million in federal, state, and local government lost tax revenues.

Fourth reason is higher taxes on gasoline, which has been made worse by lots of Democrats:

The tax bite in a gallon of gasoline is nearly equal to the costs of refining, distribution, and marketing combined. That fluctuates, of course, because most gas taxes are percentage based. At $3.79/gallon, taxes account for about 53 cents.

Fifth reason is global warming hysteria, which is the Democrat religion:

In order to fulfill air pollution reduction plans in states and localities across the country, gasoline sold in the United States has been fractionated into about 17 different boutique fuels sold in dozens of discrete markets. With three grades of gasoline per fuel, refiners are producing over 50 separate blends. Such boutique fuel requirements both increase price volatility and the height of price spikes as a function of the distance-to-market of boutique fuel producers and consumers, according to the Energy Information Administration. Boutique fuel requirements also increase the absolute price of gasoline sold in boutique markets, according to the U.S. Government Accountability Office.

Sixth reason is denial of refinery permits, which has been made worse by Obama:

Another factor contributing to the increased price of gasoline is the reduction in the number of operating refineries in the United States over the last 30 years. The number and capacity of U.S. refineries peaked in 1981, and, since then, 171 plants have closed, although the remaining plants have increased output to offset a loss of production. Though most of this reduction has been caused by the low profit potential of refineries, but others see a significant cause in “extremely tight environmental restrictions, not-in-my-back-yard community opposition, and the high cost of new construction.” Refinery profit margins have played a role in recent gasoline price hikes. TheEIA suggests that “The sizable jump in retail prices this year reflects not only the higher average cost of crude oil compared to previous years, but also an increase in U.S. refining margins on gasoline (the difference between refinery wholesale gasoline prices and the average cost of crude oil) from an average of $0.34 per gallon in 2010 to $0.45 per gallon in 2011 and $0.42 per gallon in 2012.”

Seventh reason is three rounds of quantitative easing, which causes inflation and a weak dollar, which has been made worse by Obama:

In recent congressional testimony, Robert Murphy, of the Institute for Energy Research observed: that: “From its peak in March 2009, the dollar has fallen 17 percent against other major currencies. Therefore, holding everything else constant, the dollar depreciation alone from early 2009 can explain a 20.5 percent increase in oil prices (quoted in dollars)….It is on the basis of such calculations that a recent Joint Economic Committee report estimated that Federal Reserve policies have added almost 57 cents to the price of a gallon of gasoline for American motorists.

The article also debunks the leftist myth that “speculators” are the cause of high gas prices.

It’s election time – make sure you have the facts so you can make the case.

UPDATE: Stuart Schneiderman links to a Wall Street Journal article that discusses California’s cap-and-trade (carbon tax) policy, and their restrictions on pipeline construction – both of which raise gas prices for consumers.

Who really gets rich from gasoline? Big oil companies or big government?

Here’s a great article that will blow your mind from the Wall Street Journal. (H/T Tom)

Excerpt:

With the average price of gas in America hovering around $3.50 per gallon for regular unleaded, it costs more than $50 to fill a typical car’s 15-gallon tank this summer. Why does gas cost so much?

You may blame high gas prices on rich oil company executives or greedy gas station owners. The truth is that governments rake in a larger profit at the pump than anyone—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 combination of four costs: that of crude oil, of refining gas, of distribution and marketing, and of taxes.

Crude oil costs make up about 76% of the cost of gasoline, according to U.S. Energy Information Administration (EIA). Thus $2.66 of a $3.50 gallon of gasoline is set before the oil is even refined. 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 is the next step in the process—and the next expense for drivers. 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 refining was responsible for 6% of the cost of gasoline.

Distribution and marketing—the part of the process most apparent to consumers—constitutes another 6% 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 created to appeal to customers.

The remaining 12%—or almost 50 cents per gallon today—goes directly to federal, state and 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 eight 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 gas taxes—and Hawaii, at 47.1 cents per gallon.

Some local governments have gotten in on the act, too. In California, local sales and excise taxes on gasoline average 3.1%, 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 current average of $3.80 per gallon.

[…]Exxon, for example, made only seven cents per gallon of gasoline in 2011. That’s a drop in the bucket compared to the nearly 50 cents per gallon that federal, state and local governments rake in on an average gallon of gas pumped in the U.S.

That’s not going to stop the unproductive socialists in government for accusing oil companies of being greedy. Who’s really greedy? Government is greedy. They take more of your money in gas taxes than the oil companies do.