An interesting point on gas prices…

From today’s Georgia Public Policy Foundations, “Friday Facts” email…

“While oil companies make a profit of 13 cents a gallon on gasoline – profit that is plowed back into the search for more – the federal government makes 18.4 cents,” Investor’s Business Daily notes in an editorial. “Then you add the state and local taxes. . . . Congress should look in the mirror about restricting supply and raising prices.”

Talk amongst yourselves…

31 comments

  1. Federalist says:

    Stop it with the conservative bias, how much do the oil companies make off of a barrel of oil? there are numbers that mean something, and others that do not. You, GPPF need to stop advocating and start telling people the whole truth.

  2. Bill Simon says:

    Well…if there are 55 gallons of oil in a barrel of oil, you cannot make anym ore than 55 gallons of gasoline (Law of Conservation of Energy), so, the maximum an oil company could make on a barrel of oil is: $7.15….which is about a 10% profit on a $71.50 barrel of oil.

    Pretty suck-ass gross profit margin if you REALLY think about it…oh…wait…the key word is “think”…libbies hate to use their minds.

  3. Federalist says:

    Screw you bill simmon. Speaking of thinking, it is the law of conservation of matter, and 55 gallons of oil does not yield 55 gallons of gasoline, matter is not lost…rather it is converted into unusable waste. The law of conservation of energy would simply state, in this case, that while oil if being converted into gasoline, there will be not energy lost or created. Read a science book.

  4. Federalist says:

    furthermore, there is a higher profit margin for all of the different petroleum products that are made while converting crude oil into other fuels (propane, butane, etc).

  5. RJL says:

    The average is about 20 gallons refined per barrel depending on the source of the oil. And the obvious differnce between crude supplier and refiner needs to be accounted.

  6. Rick Day says:

    when you two stop bickering. perhaps before you shoot off at the mouth about oil and things only us Texans know about, do some googley fine research!

    The motor Fuel Excise tax contributed in ’05, amounted to 4-5% of the state coffers. I think it ought to be tripled. That will make my commute more comfortable! (Except I commute one mile, on a scooter that gets 65 mpg, yikes!)

    Of course, the oil companies have to pay about five cent a gallon in taxes, passed on to, you guessed it, the consumer. So the base price, which oil tax and the above stated Federal tax, THEN add state tax, and what we have is:

    We are taxed on a tax by our state. How much extra money do we pull in on this extra tax on tax? net net net? sheesh!

    Oy! Lets not go THERE.

    Oh, and for you J.R. Ewings out there, out of one (ahem) 44 gallon barrell of crude, when refined, produces about 20 gallons of finished motor gasoline, and 7 gallons of diesel, as well as other petroleum products.

    Ya’ll ain’t from Texas, are ya?

  7. Federalist says:

    No I “ain’t” from Texas, but unlike mr. simmon I understand that oil is not converted into only gasoline. Thank you for the clarifications Mr. Day.

  8. Demonbeck says:

    It doesn’t change the fact that the feds are taking 18.4 cents per gallon of pure revenue while the companies that are selling it are making 13.

  9. Federalist says:

    big deal. that 18.4 cents is going into paying for this damn war. so in fact, consider this…the fed gov is withholding the money made by corporations in the mid east in an attempt to stabilize the region for national security.

  10. mr. winston says:

    Question: How many of the top 10 oil reserves are held by independent “big oil” companies and not held national companies such as Aramco, Pemex, Petro Bras?

    Answer: 1
    But this is the best part!!!! the 1 independent oil company is Lukoil (Russia) which is considered independent because the Kremlin only owns a 49% stake!

    So where is evil Exxon? they are 12th. And why is this point very important? Because reinvestment of profits is paramount to finding new supplies. It is a fact that we are running out of supply that is easy to tap. There is a ton of oil in the tar sands of Cananda and deep in the ocean but it is very expensive to tap. And while the previous comments are fact, this is my opinion, reinvestment is simply not being done by State owned oil companies. So while it is easy to criticize big oil for making money off a barrell of oil, at least they are reinvesting it to find more supply so that gas hogging Americans can hop in their cars and drive everywhere. I heard an estimate yesterday from an exploration company that $4.0 trillion of reinvestment will be needed to meet demand in 2020. (That is using the historical 1% growth in demand since 1970). We are going to be in big, big trouble in a few years and its not going to be the fault of big oil.

    So go on, continue hating big oil companies if you want. It is kind of en vogue being anti-corporate and all. But I would encourage you to research independent sources to figure out where the profits are really going.

  11. RJL says:

    Lost in this discussion is that phasing-in CAFE standards up to 35mpg over a 7-year period would radically alter the oil-dominant political balance viz the Middle East and likely have an impact on financing of terrorism. A trifecta.

  12. Federalist says:

    thankyou bill bradley. at 45 mpg we would be energy independent…thats right…we would not need to purchase oil from foreign sources.

  13. Demonbeck says:

    Aside from folks like Federalist who advocate higher taxes for government service, I’d rather see the federal gas tax drop. It would cut costs for business – thereby allowing the economy (and tax revenue btw) to grow.

  14. Federalist says:

    that does not always work demonbeck…just like when sonny suspended the gas tax a couple of years ago,…the gas prices stayed the same and the oil companies pocketed that 14 cents/gallon. Americans have been conditioned to pay high gas prices, and the oil companies will continue to suppress output to keep prices artificially high. Supply and demand does not always work, especially in these times of modern economics.

  15. Overincorporated Fulton says:

    The federal and state taxes on gasoline should be increased. We’re going to have a lot of transportation projects to fund in the next century, and the money has to come from somewhere. Lowering these taxes would temporarily reduce the price, only to be replaced by higher demand (driving it right back up) or by an increased profit margin for oil companies (also driving it right back up). Since oil companies collude to keep their refineries in about as good of shape as the Superdome, we can’t depend on them to leave prices lower after a reduction in taxes. The answer is to RAISE taxes on gasoline, which would temporarily drive up prices but would ultimately reduce demand (good) and increase flow of revenue to our bankrupt, bridge-to-nowhere building government so they don’t tank our economy with all their damned debt (also good). Furthermore, I wouldn’t mind seeing a little less money flow into the record profits for oil companies and seeing a little more public money invested in transit projects.

  16. RJL says:

    Raising CAFE standards (lowering demand) is a free-market solution with enormous benefits. One would think the Repubs would be out front on that parade instead of the fixation on taxes (which would likewise drop). Too logical?

  17. Federalist says:

    No, i think that the Repubs are more worried that there war chests will lighten as result.

  18. Holly says:

    No. CAFE standards don’t have a history of reducing demand. As the standards increased, the consumption did as well, thereby nullifying the anticipated benefits. One downside to CAFE is that cars became more lightweight, which indirectly has led to more fatalities in crashes.

  19. Contrarianistic says:

    Any of you Texans or tax-ans know how much is raised at the federal level by motor fuel taxes? How much is spent on roads? Is the government really profiting from this or is this just how we pay for asphalt and concrete?

  20. Bull Moose says:

    Oil companies have not plowed profits into refineries and that is a major part of the problem.

  21. Overincorporated Fulton says:

    The ONLY thing that will reduce demand is a higher price, period. Increase gas taxes, raise CAFE standards, and use the increase in revenue to give tax breaks to those who purchase fuel efficient cars.

  22. Icarus says:

    Demonbeck,

    Generally, I agree 100% with that philosophy.

    With Oil, however, I’ve started thinking in ways that seem down right un-Republican.

    (No disagreement with the general premise of this thread. The govt loves to make enemies out of big oil and tobacco and then tax the heck out of them. Hypocritical but revenue enhancing, yes?)

    I think reducing our country’s dependence on foreign oil is a matter of national security. One of the biggest disappointments I have with the Bush administration is that there has been little advancement of a national energy policy.

    I could support higher gas taxes if the revenue was offset with other tax cuts. I could even support some out of the box thinking such as using higher gas taxes to support privatizing social security.

    Raising CAFE standards doesn’t affect market forces for consumers. Raising the price of gas would make consumers factor in operating costs and then demand more fuel efficient vehicles.

    I’m personally tired of sending our money overseas to fund terrorist supporting countries. I think national security trumps low taxes in this area.

  23. Holly says:

    Icarus,

    I agree we should work toward a more comprehensive energy plan for this country. I think there are lots of ways to do this, but I still disagree on CAFE standards.

    That said, we should be investing in other forms of energy. Of course, that will take time and investment. I say it’s worth it.

    What can we do in the meanwhile? We can reduce our personal gas consumption. Those of us in the southeast (which I’m pretty sure is everyone here unless there are some Yankee spies lurking around 😉 ) need to start looking at other modes of transportation. Rick Day mentioned his scooter. Biking and walking are good ideas. Carpooling is an option. Light rail would be an idea for the future, as it will take a long time to build. . . better late than never.

  24. Icarus says:

    A lot of comments from when I started writing my last post, and when I got it posted.

    Holly,

    We don’t disagree on CAFE standards. I don’t like them. They have unintended consequences. As written, they favor foreign manufacturers who don’t have large vehicles/trucks in their product mix. They force companies to produce products that are not what the market demands.

    Raising gas prices, via higher taxes, changes the market forces and forces consumers to demand more fuel efficient vehicles.

    Higher gas prices are the quickest solution to motivate consumers to consume less, via alternative transportation, greater efficiency, better choices, etc.

  25. Demonbeck says:

    I think we need to raise CAFE standards, lower gas taxes, increase tax incentives for hybrids and the like, build more refineries and begin searching for oil off the coast of Florida and ANWR.

    In one fell swoop, we would be lowering demand, increasing supply and giving incentives to people for helping the environment.

  26. mr. winston says:

    “At 45 mpg we would be energy independent”….for how long? one month? very possible. one year? also possible. in perpetuity? I seriously doubt it. And is that 45 mpg CAFE standards or actually driving and getting 45 mpg? b/c that would mean you are driving either a scooter or a hybrid. And many hybrids don’t even get close to an actual 45 mpg. For the record, I don’t think CAFE is a good estimate of the actual amount you can drive on a gallon of gas.

    I’m not saying that I don’t want that to be the case (more efficient cars) just that kind of change will probably not be able to take place overnight. It’s simple economics, to lower the price, we will either have to increase supply via a shift in the supply curve to the right (which is not realistic as elaborated in an earlier post). The supply curve is actually shifting very rapidly in the opposite direction.
    Or we decrease demand, and I don’t think consumers are going to do that voluntarily. Obviously, 35 mpg CAFE standards will help curb demand, however I’m afraid high prices (gasoline in excess of $5.00/gallon) will eventually be the market solution to change driving habits.
    We’d also be a little closer to energy independence if all Atlantans took Marta to work. Do you see that happening? No chance right now, but at $5.00/gallon it could get interesting. It’s coming, sooner than you think too.

  27. Icarus says:

    More incentives for diesel as well as Hybrids. The new generation of diesel engines are about as efficient as hybrids and have much improved smog emissions. Now that the US has switched to low-sulfur diesel fuel, the European manufacturers will be producing a lot more diesel cars starting next year.

    Also agree about drilling off Florida and in ANWR. More refineries, and geographical disbursement of those refineries, would be a big plus.

    We need to get the State Economic Development group working on putting a major refinery near Savannah or Brunswick, with a pipeline to tie into the main lines near Atlanta. This would help insulate the East Coast from another Katrina like supply breakdown.

  28. mr. winston says:

    For those who think that big oil companies have been cheating the public, will you please provide me with some research papers that support your arguments. Blogs don’t count. I’m trying to write a white paper on this subject, and some hard facts would help. Unfortunately quoting bloggers doesn’t get you very far these days.

    Bull Moose, it is my understanding, and I could be wrong on this, that oil companies have not plowed profits into refineries because they are simply not given the chance to do so. For example, if I you and I had a couple hundred million and we wanted to build a refinery in North Macon tomorrow. We’d be responding to countless lawsuits by early next week. Everyone wants more refineries, just not in their state.

  29. Demonbeck says:

    Very true mr. winston, the oil companies aren’t stopping the refineries, environmentalists and NIMBY attitudes do.

  30. This is a very interesting thread. I commend the GPPF for starting this debate and getting people talking about the issue.

    I would like to point out that the Georgia 4% prepaid sales tax on motor fuel will increase next Friday by 2.1 cents. This brings the total State taxes on motor fuel to 17.3 cents(9.8 cents prepaid sales tax and 7.5 cent excise tax). This number also does not include any local county or municipality taxes that is now 7.4 cents. Georgia is one of only a handful of States that charges a sales tax on motor fuel. So for all you folks that think we have one of the lowest motor fuel taxes in the country, it’s not true.

    Fed 18.3, State 17.3, local 7.4 = 43 cents a gallon in taxes.

    2.4 cents of the State’s portion is put into the General Budget to be spent at the pleasure of the General Assembly.

    Please see HB 293 that would have consolidated the two seperate taxes on motor fuel in Georgia and would have forced the use of motor fuel taxes for only transportation. This bill would have meant that only an act of the General Assembly could raise taxes on motor fuel adding a much needed dose of transparency.

    Oh and the 2.1 cent increase will also effect CNG.

    Just the Facts.

  31. whitemalevoters says:

    White male voters are strapped for cash because socialist pigs like “Federalist” think the government is better at spending our money than we are.

Comments are closed.