Issue Position: Gasoline Prices

Issue Position

Issue Position: Gasoline Prices

There's a lot of talk about the hundreds of billions in profits the oil companies make.

The truth is, government makes more money from oil production than the oil companies do, without producing one drop of oil.

And, you and I pay for it at the pump.

They want you to believe that you are being gouged by "Big Oil," and that their profits are "excessive."

With a cost of crude oil at $109 per 42-gallon barrel, the oil companies are paying nearly $2.50 per gallon for the 44 gallons of product produced from each barrel. According to Exxon-Mobil figures, however, they estimate that the cost of the raw product amounts to about 74% of the price of a gallon of gasoline, which means that they are apparently charging more of the cost of other products produced. This nearly $1.69 per gallon is money that is sent overseas to those that actually own the oil.

It is estimated that about 16% of the price we pay at the pump goes to manufacturing (refining), transportation and marketing (wholesale and retail) of the product — or about 36-1/2¢ per gallon.

Various governmental bodies then assess taxes at the local and state levels where oil companies operate. These taxes are not only assessed on income, but on property and equipment. Combined with federal taxes, including income, about 10% of the price of a gallon of gasoline is collected, or just over 22-3/4¢ per gallon.

Then, the state of Idaho and the federal government collect "fuel taxes" directly from the consumer amounting to nearly 16% of a gallon of gas, or 43.2¢ per gallon (25¢ state and 18.2¢ federal).

Between the taxes charged directly to the oil companies and the tax you pay at the pump, the direct cost to the consumer is 24.35% of the price of a gallon of gasoline — or 65.97¢ per gallon.

Increasing taxes on the oil companies, as the liberals would have us do, will do nothing but increase your price at the pump, because all of the costs of production (which includes taxes) is included in the retail price.

In fact, after the largest U.S. oil company paid all of their "direct" taxes, the government ended up with more cash — about $19 billion more. Their federal income tax rate of 44% (in 2007) was 14% higher than the average tax rate of 30% paid by the leading 80 U.S. companies.

That $64.7 billion was paid by you and I in the prices we paid for petroleum products from gasoline to heating oil. It should be noted that these taxes are for only one oil company, and that when combined with the taxes paid by the other oil companies, we as consumers have paid hundreds of billions of dollars in "hidden taxes" as part of our energy bill.

The billions in "profits" are from trillions in sales, and only amount to about 9.2% profit for Exxon. When compared to other American companies, that amount of return is low. ChevronTexaco earned 7.7%, ConocoPhillips earned 8.4% and Shell earned 8.3% in profits — while General Electric earned 11.5%, Bank of America 20.5%, Citigroup 15.8%, Anheuser-Busch 14.3%, Kimberly-Clark 12.5% and Coca-Cola 20.4%. When compared to other companies, are the oil companies really making too much?

Who are the "fat cats" making all that profit?

Many of us are being paid those "profits" through dividends paid on our retirement accounts, 401Ks, and even as part of our investment through Life Insurance. ExxonMobil has about 5.35 billion shares of stock outstanding, and there are a lot of owners. In 2007, those stockholders received dividends (a share of the profits) in the amount of $7.25 per share — and at the current price per share of about $85, that's a return of just shy of 8.5% — not an excessive profit for the "owners" to make when there are a lot of other investments that pay a much greater return.

What about the nearly 25% in taxes being collected by the government? ...taxes that you and I are paying in the cost of the products we buy?

Liberal politicians and the media want us to believe we are being gouged by the oil companies, and that is why they talk about the hundreds of billions they earn in profits, rather than talk about the percentage of return. It is nothing more than "politics as usual" and "smoke-and-mirror politics."

A decreasing demand due to the price of fuel has forced down the price per barrel paid by the oil companies, and we have seen the resulting decrease in lower prices at the pump. The fear that the American people are going to demand the federal government lift its moratorium on drilling here in the United States, in ANWR and along our coastal shelf has also helped drive the price charged by the foreign owners down.

There are some that would have us believe that drilling here in the United States would not lower the price of gasoline, because the amount of oil that would be produced here would not increase the supply enough to make any difference.

Those people are missing the point completely. Drilling here will lower the price at the pump because oil companies will no longer be paying out 74% of the retail price to the foreign nations that control the oil supply.

Not only do we need to open up public lands for oil and oil shale exploration and recovery, but our federal government must also eliminate the regulation and red tape that has made refurbishing of, or the building of new refineries right here in this country prohibitive in both cost and length of time required. Increasing the production and refining in the United States will also provide much needed jobs right here at home, as well as decrease the costs of transportation we now pay to get the oil or refined products to the United States from outside the country.

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