What do Oil Companies Make on a gallon of Gas?

A multitude of factors can affect an individual oil company's profit on gasoline sales. However, data from the U.S. Energy Information Administration (EIA) indicates that when the average price of unleaded regular peaked at about $3 a gallon in the middle of 2006, major companies were making a profit of about 10 cents a gallon on their U.S. refining and marketing operations. Profitability factors include the efficiency of the firm's refining, distribution and marketing system, as well as its source of raw material. In times of rising oil prices, companies that own and produce a considerable portion of the crude oil used in their refineries may benefit more than other companies that must purchase most or all of their supplies on the open market.

Crude oil generally represents the single greatest cost component of gasoline, which explains why gasoline prices rise and fall so quickly with changes in the world price of crude oil. For example, at ConocoPhillips, crude oil costs make up 85 to 90 percent of the total costs of running its refineries. As an international commodity, crude oil is bought and sold 24 hours a day, so its price is changing constantly. In the matter of a day or two, crude oil prices can move up or down by several dollars, depending upon supply and demand factors.

In general, crude oil accounts for roughly half of gasoline's price, as shown in the graphic. Other price components include refining, distribution (pipelines and tanker trucks) and marketing (service stations and convenience stores). These so-called "downstream" costs have been falling as companies have made operations more efficient. When gasoline reaches the pump, another major factor comes into play – federal, state and local taxes – which average about 20 percent or more of the pump price. The federal tax is 18.4 cents per gallon, while state and local taxes vary from 8 cents in Alaska to nearly 50 cents per gallon in New York.

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