What do Oil Companies Make on a gallon of Gas?

I actually work for one of the top three largest oil companies. I do find it hilarious when you conservatives come to our rescue to justify our profits.

Thank you, the check is in the mail.

I'll go out on a limb, here. I haven't researched this, and I don't plan to use a bunch of details and graphs. I'll simply go from what you've presented--

The cost of crude, which in the last couple of years has nearly doubled, represents about half the cost of producing a gallon of gas. In the same amount of time, the cost of a gallon of gasoline has nearly tripled. Fuel taxes have pretty much stayed the same. Oil companies are posting record profits. These things make me skeptical about any claim that oil companies are only running a 3% margin on their product. It may be true, but I have a hard time believing it. You also have a strange situation in which gasoline only cost about $2.50/gallon when oil was selling at $70/barrel, but now costing over $3/gallon when oil is selling at less than $60/barrel.

Additionally, you have companies acting to artificially constrain supply (whenever some hurricane doesn't supply a natural reason to constrain it), and yes, I know the FTC report says that it didn't happen, but I also remember oil company executives citing Katrina as the reason supplies were constrained, and I'm aware that they've recently announced that they won't be increasing refining capacity quite so much as they had planned as long as the government continues to push for alternative fuel sources. The FTC might actually be telling you the truth, but when the very people they are defending are saying something to the contrary, it kind of makes you wonder.

In the end, it really comes down to this-- fuel costs affect the price of everything, and have raised the prices on quite a few staple goods. But even if you were to ignore that, the impact of fuel prices on people's required travel has quite an impact. The government claims the average American uses 500 gallons of gasoline a year. It's probably a bit more than that, but even at that figure, the jump in the price of gas is costing the average American an extra $1000 post-tax dollars/year, not even considering the impact that it has on the price of other goods. Tack that onto the increase in the cost of living (which doesn't include fuel costs) and you're looking at a quite a jump-- 5-10% of your average person's post-tax income. Is it any wonder that people are pissed off?

Most businesses are offering an average raise in salary of from 2-3%. That doesn't even keep pace with cost of living increases. Throw another 3-5% loss on there that is all linked directly to a single industry, an industry which is making record profits, and which has gone on record as not being interested in lowering the cost of gas, and maybe you can understand why there are many people out there who don't give a flying @!$%# if the oil industry claims it's only making a dime/gallon on gas. What they see are Record profits couple with record costs of gasoline, and a net loss to the bottom line on their bank account.

It's particularly galling to have some oil company CEO go on national television to lecture the American public on why his record profits "don't really" come at their expense, knowing that the impact of rising gas prices pragmatically has no effect on him other than to raise his overall worth a couple of tens of millions of dollars.

If it's only an image problem, it's a particularly intractable one.

By 2009, I hope to be driving a gas electric hybrid that gets 100 mpg. Barring that, I'm open to purchasing a diesel vehicle, and cutting my fuel costs by arranging to "recycle" local area fryer grease. As far as I'm concerned, the less money I give to the oil industry, the better I'll like it. I won't be satisfied til I drop my cost per mile fuel costs down to around 1 to 3 cents per mile.

There is a bit of discussion in the comments here that are relevant to this topic.

I've spent a lot of time looking into this over the last few months as I too have been curious about what the real story is behind gas being $3+/gallon. We all remember the good-ol-days of sub $1/gallon gas but looking at historical data one can see that oil companies were in a bit of trouble in those days as well.

We have done this to ourselves for the most part. Granted there are things relating to the global oil supply that we have no control over but that isn't the only factor leading to the price we pay in gas. Essentially, oil companies have benefited greatly from our zeal at legislating their business. The constraints we have put on the natural forces of supply and demand have had an impact. And that impact is felt on our pocketbooks as gas prices go up.

The current issue causing our pain in gas prices is more related to the bottleneck of refining capacity than just the price of oil.

The process of bringing gasoline to consumers is really complex and requires a tremendous amount of investment in capital expenditures and in exploration costs. The aforementioned note about a gallon of beer being more costly than a gallon of gasoline is a valid thing to bring up. Beer is far less complex to make and it's raw materials cheaper and easier to obtain. And despite $0.50+/gallon in taxes gasoline is still cheaper. Remove the taxes and gasoline is cheaper than a gallon of Coke. And soft drinks are far less complex or expensive to make and deliver to consumers.

There are things that could be done right now - this Congressional session - that would have a positive impact on the price we pay in gasoline in the near future. How about reducing the number of "boutique" fuels required by the EPA down to 1 instead of the roughly 17 that there are now. How about eliminating the difference between "summer" and "winter" formulas. These cause slow-downs in production for switching over the refining process between summer and winter and vice-versa. They also cause distribution problems of getting the various "boutique" fuels precisely to the areas where they are to be sold. They cause problems in supply as one area may experience a higher demand that was forecasted and despite surpluses that may exist in other areas, those fuels cannot be used if they require a different "boutique" blend. Not to mention that the "winter" blends tend to cause a significant decrease in fuel efficiency causing people to have to fill up more often.

Then there is the ability for us to significantly drop the price of crude by increasing supply from our major resources of crude in our own country.

If we work to eliminate the legislatively produced bottlenecks here we can affect the price we pay at the pump.

The price of oil per barrel going up does not necessarily mean that the oil companies automatically make more money, strange as that may sound.

Particularly when drilling in foreign countries - here's an example. Many years ago, we negotiated with a certain African country to explore, and develop their oil. The deal we struck was that after covering our costs, we would get $1.00 per barrel. That's it, just one dollar a barrel.

I'm unsure what the price of crude per barrel was at the time, but let's say it was $20. On average, in the country in question, at the time, it cost approximately $6 a barrel to get the oil out of the ground and into a tanker, or into a pipeline. This means that after covering our costs of $6, and taking our $1 per barrel, the government of said country got $13 per barrel produced.

If the price of crude then goes up, we still only get our $1 per barrel, and the the only one benefiting from the rise in price is the government of the country where the oil is, not the oil company.

Of course, this deal was stuck many years ago and things have changed, I'm sure we now get more than just $1 per barrel, but I would be surprised if it was more than about $5.

I mention it to illustrate that just because the price of crude goes up, it does not necessarily mean that the oil companies instantly start raking in the cash.

I am not an economist, nor do I profess to be especially proficient in this subject. As a conservative thinker though, I must interject that I find it to be in poor taste when liberals complain about the current gas prices while supporting liberal politicians that set ridiculous gas taxes.

Filling up an explorer, about ten dollars goes to state and federal government.

Curiously enough, D.C.'s gas taxes are about 38 cents, beneath the national average, while Michigan's (home of the BIG 3) and California's (home of the most cars) are over 50 cents. Thank you Democrats.