Oil Profits: Cry Elsewhere

Today, Exxon Mobil announced a 2^nd quarter profit of 10.36 billion in profits. As with any news like this, all local news and national news media outlets hit the streets to interview the American public at gas stations across the nation. After informing these people about the profits that Exxon Mobil has posted the normal outcry and moaning begins. “The oil company is stealing from us, they shouldn’t be able to hit us and set prices the way they do. Something needs to be done about this so that the American people don’t have to pay this amount for gas prices.” This is the general type of quotes and answers that get aired on the news.

So the gasoline companies are stealing from the American people? Let’s find out who really is stealing the American’s people money by doing a breakdown of what goes into the $3 price per gallon for gasoline. Taking from the California Energy Commission web site the following is found out.

Over a half of the cost for the price of a gallon of gas goes into the importing of the crude oil from the unstable countries of the Middle East. This is a $1.72 in total cost for the importing of oil from these countries. The next largest percentage, about 25 percent, of the cost of gasoline goes into the actual refining process of the oil. The refining of oil is the process to extract various types of fuels, such as kerosene, from the crude oil. This refining cost is on average .80 cents. Thus far, the complete total for a price of gas is at 2.52 cents and the gasoline companies haven’t even sold a gallon of gas. Next, .60 cents on average is the total tax and storage fee that goes into the price of gasoline, this could vary depending upon state tax on gas and is about 20 percent of the price per gallon. This brings the total gas price to 3.12 before the gasoline has even reached the gas station and entered your car. The average amount of money that is being used to market, distribute and eventually have profit on the gasoline is on average .10 cents, finally reaching the 3.22 for gas. Yet. taking into consideration distributing and marketing costs remove .05 cents from the .10 and the actual profit the gas company pulls in is .05 cents. Yet, to post the 10.36 billion in profits Exxon Mobil had to sell at least 518 million gallons of fuel, based off of the .05 cents of profit after the costs of distribution and marketing.
Yet, out of the 10.36 billion of profits close to 7 billion of that money has to go back into the refining process. Ultimately the overall profits of the oil companies when taking in the cost and expesnse of doing the business is closer to 3 billion then the 10 billion posted profit.

It is interesting to note that the media never provides this type of information when reporting about the profits of the oil companies. Likewise, the news media is suspect when it comes to the fact that they never air an individual who actually understands what goes into the price of gasoline. Last, it is obviously part of the spin and goal of the media never to put on the air anybody who actually applauses the Big Oil companies and their profits, but intstead place the blame on the real culprit for the cost of rising fuel in the first place, the government.

The government, at both the federal and state, take more money and earn more on the price of gas then the companies producing the gas in the first place. So if anybody wishes to cry foul and ask for ways of lowering the price of gasoline, write to your local official and demand a lowering of the gasoline tax at your state level and write to your senator and congress man asking for the same to be done on the federal level. Whilst writing your congress man and senator you can also request that lands be opened for further oil drilling and exploration for oil. This is the main problem for the high cost of fuel, the $1.72 price for the importation of oil, which doesn’t need to take place. Due to the various government regulations and restrictions placed on the oil companies it is a surprise that oil companies are actually able to survive at all. There are plenty of oil reserves being untapped off the coast of The Gulf of Mexico and in Alaska that would greatly reduce the importing of oil from unstable nations and thus reduce the overall cost of oil. There is even a process of extracting oil from a certain type of shale that has become a more viable option since the process has improved and can thus become a profitable endeavor. Some measures have been taken as only yesterday, July 26^th 2006, oil companies will be allowed to drill 500 feet from the coast of the Gulf. Yet, this is not nearly enough to truly reduce the price of fuel and oil in the United States.

So, where was the outcry from the public when the Government began placing restrictions on the oil companies? Where was the outcry from the public when the government raised gasoline taxes? Where was the outcry, when regulations placed on the refinement process have caused the complete lack of expanding and building of new refineries over the country in the last 20 years? So for those who wish to cry and scream at Big Oil, cry elsewhere for they are not to blame for the current price of gasoline.

(Note, this is part of what I was going to say in my original oil article, but not the original article I intended to write.)