Published May 18, 2008 07:30 am - You may be surprised by who takes the lion’s share of profits — and who’s left with the scraps — every time you pay record-high prices at the gasoline pump.
Gasoline nears $4
Who’s getting rich here?
By Damian Gessel
The Daily Item
First of a three-part series
You may be surprised by who takes the lion’s share of profits — and who’s left with the scraps — every time you pay record-high prices at the gasoline pump.
From producers to shippers to retailers to the government, everyone who touches that $3.75 gallon of gasoline before it fills your tank takes a slice of the pie. But while every other cost associated with gasoline has stayed static or fallen since January 2000, one major chunk has climbed through the roof.
First, who isn’t getting rich at your expense:
Gasoline stations make just pennies on the dollar for every gallon. In fact, gasoline station profits as a whole are near an all-time low, according to the Energy Information Association. As of March, retailers’ revenue accounted for 7.9 percent of gasoline costs, or less than 30 cents for every gallon at today’s national average prices. Most of those 30 cents is used to pay for transportation, marketing and other costs.
Most gasoline station owners, like Kevin Kratzer of Kratzer’s Citgo in Selinsgrove, couldn’t exist on pumps alone. Kratzer’s gasoline pumps serve mostly as a means to drum up business for his auto repair shop. Other gasoline stations make the bulk of their revenue from food and beverage sales.
Government gasoline taxes have consistently fallen since 2000. The Energy Information Association says government as a whole grabs just 12 percent of the gasoline pie these days, down from 32 percent in January 2000. At today’s prices, that means the government is making about 45 cents a gallon, most of which is used to pay for transportation projects.
Refiners aren’t getting rich, either. Their revenue accounts for about 8 percent of the cost per gallon, or about 30 cents. Bill Bush, a spokesman with the American Petroleum Institute, said profit margins in the refining sector keep shrinking. In fact, thanks to high demand for diesel fuel and heating oil in developing countries like China and India, refiners are turning toward distillates and away from gasoline.
So who is getting rich every time you top off the tank?
“Crude oil,” Bush said, “accounts for the big increase in prices.”
As the cost of a barrel of oil has steadily risen, so has the price of gasoline and the profit margin of crude oil producers. In 2000, crude oil producers took home just more than 40 percent of gasoline profits. Today, those same producers are banking more than 70 percent.
In other words, Big Oil’s income accounts for $2.66 of that $3.75 gallon of gasoline. Even after subtracting its operating costs from that $2.66, its profit margin is so staggering that legislators for months have been jabbing pointed questions at oil companies.
For oil giants like ExxonMobil, the soaring price of crude has translated to $40 billion in revenue. And Middle Eastern oil companies, by some counts, have reaped 10 times that.
John Cogan, an information specialist with the Energy Information Association, pointed out that countries with the biggest oil supplies — and the easiest access to those supplies — are making the most. According to the American Petroleum Institute, Saudi Arabia, Iran, Iraq, Kuwait, Abu Dhabi and Venezuela lead the world in oil reserves.
To put things in perspective, Saudi Arabian National Oil Co. has 32 times more oil than ExxonMobil.