Yesterday, President Barack Obama announced the creation of a Federal “task force” charged with investigating possible price gauging in the oil industry.
Speaking in Nevada, the President told the audience that the task force would “root out any cases of fraud or manipulation in the oil markets that might affect gas prices, and that includes the role of traders and speculators. We’re going to make sure that nobody’s taking advantage of American consumers for their own short-term gains.”
One might argue that the most significant thing impacting oil prices right now is the massive devaluation of the US dollar, brought about as a result of massive amount of money we have printed in the last two years.
Still, gasoline is nearing that $4 a gallon mark, and I am interested in who is making the most money from all those gallons of gas, so I decided to see what the folks over at FactCheck.org had to say on the subject:
Q: Does the government really make more in taxes from the sale of a gallon of gasoline than the oil companies do?
A: Possibly. Both taxes and profits account for a large share, but which is larger depends on too many unknown factors to allow for a clear answer.
OK…it’s complicated. That’s what they’re saying, right?
Here is their conclusion:
A publication from the American Petroleum Institute, the industry’s principal lobbying arm, displays a graphic stating that “taxes” made up 15 percent of the price of gasoline at the pump in 2007 (that figure comes from EIA) and showing a figure for “earnings” (a measurement API prefers to straight “profit”) of 8.3 percent. This figure is the average earnings for the industry per dollar of sales.
On closer examination, however, that 8.3 percent earnings figure turns out to be after-tax income. The pre-tax profit margin would be considerably higher.
Wait a minute.
The government makes @15% on a gallon, and the oil companies make about 8% AFTER taxes.
Should we not then add that the taxes collected by the government from the oil companies to that 15% the government gets form us at the pump, in order to calculate how much the government makes from the sale of a gallon of gas?
Isn’t THAT what the government makes?
So, if they get 15% at the pump, and they get a significant amount of money from the oil companies (it must be significant, after all, FactCheck.org says that the oil company’s “pre-tax profit margins would be considerably higher”) then it is feasible that the government’s take on the sales of one gallon of gas may be as high as three times what the oil companies make on the same gallon.
Let’s speculate that the tax at the pump is 15%, and that corporate taxes are 10%. That means that the government gets $1 for every $4 gallon of gas each one of us buys.
Mr. Obama…save yourself the cost of that task force.
I think I found the problem.