No one gets richer off gas than government

By Drew Johnson / Guest CommentaryApril 3, 2013 

With the average price of gas in America between $3.50 and $4 per gallon for regular unleaded, it costs $50 to $60 to fill a typical car's 15-gallon tank.

You may blame high gas prices on rich oil company executives or greedy gas station owners. But the truth is, governments rake in a larger profit than anyone at the pump.

The price of a gallon of gas is based on the combined cost of four different expenses: the price of crude oil, the cost of refining/manufacturing gas, distribution and marketing expenses, and the amount of taxes levied on gasoline.

Oil costs comprise about 76% of the cost of gasoline, according to U.S. Energy Information Administration (EIA). That means $2.66 of a $3.50 gallon of gasoline is set before the oil is even refined and turned into gas.

Refining oil to manufacture gas is the next step in the process. During the refining process, gasoline is extracted from crude oil, and additives, including lubricants and detergents to reduce engine deposits, are added. As of January 2012, the EIA found that the refining process was responsible for 6% percent of the cost of gas.

Distribution and marketing -- the part of the process most apparent to consumers -- constitutes another 6% of gas prices. That portion of the cost includes the shipping and transportation of the gasoline, a markup to cover retailers' expenses and advertising.

The remaining 12% -- or almost 50 cents per gallon -- goes directly to federal, state and even local governments in an array of sales and excise taxes.

The federal gas tax is 18.4 cents on every gallon of gasoline sold in America. State gas tax rates vary from a low of 8 cents per gallon in Alaska to a jarring 49 cents per gallon in New York. Other states where it's steep to fill up include California and Connecticut -- each with 48.6 cent per gallon state gas taxes. Some local governments have gotten in on the gas tax act, too.

California's local sales and excise taxes on gasoline average 3.1%, according to the Los Angeles Times. That works out to about 12 cents in local taxes for each gallon of gas, based on the state's $3.80 a gallon average.

Florida Today reports that Brevard County -- the Florida county home to the Kennedy Space Center -- expects to siphon more than $15 million from motorists this year.

Believe it or not, government makes far more from gas sales than all of the oil companies put together.

Exxon Mobil for example, made only seven cents per gallon of gasoline in 2011. That's just a drop in the bucket compared to the nearly 50 cents per gallon that federal, state and local governments rake in one an average gallon of gas pumped in the United States.

Gas taxes are particularly unfair because they hit the poorest people the hardest. Most people have to drive, whether to work, to the grocery store, to pick up kids from school or any of the dozens of other reasons we pull out of the driveway each day. These responsibilities don't change whether you make $25,000 or $250,000 each year.

The next time you begin to blame oil companies, speculators or service stations for high gas prices, remember, no one get richer off of gasoline than government.

-- Drew Johnson is a senior fellow at the Taxpayers Protection Alliance, a nonpartisan, nonprofit educational organization dedicated to a smaller, more responsible government. Visit TPA at protectingtaxpayers.org.

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