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From the Pump to Profits: Where Your Gas Money Goes

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Newsflash – Americans spend a lot on gasoline. In fact, over the lifetime of an average vehicle, you spend around $22,000 on gasoline. That might be as much as you spent on the vehicle in the first place. So where does all this money end up?

We looked at this question in a new report entitled appropriately enough, Where Your Gas Money Goes. This is a particularly timely report given that several major oil companies recently released their earnings for the last quarter of 2012, and their profits soared to new heights. It is also not breaking news that oil companies reap huge benefits from the status quo and invest in obstructing progress toward oil-saving, climate-friendly solutions.

Oil companies have been trying to improve their public image by arguing that these record-breaking earnings benefit the millions of Americans who own stock in oil companies – so go ahead – fill up your gas tank and help out your fellow citizen’s retirement portfolio. But this rhetoric begs the question: Does your oil use benefit you?

In our new report, we calculated how much money an average consumer spends on gas, where that money really goes, and what a consumer can expect in return. It turns out that regardless of how many shares you may own in oil companies, your oil use fails to benefit your bottom line. In fact, the ‘average’ ExxonMobil shareholder gets far less than a penny back in additional dividends from their annual gas expenditures. Even ExxonMobil’s CEO Rex Tillerson, who owns 1.7 million shares of ExxonMobil stock worth almost $150 million, would only get 34 cents back per year from spending money on gas purchased exclusively at Exxon stations.

Everyone’s bottom line, therefore, is better served by spending less money on gas and investing in oil-saving solutions such as fuel-efficient vehicles.

So back to the question of where your money really goes, or doesn’t:

It doesn’t go to gas stations. Out of a $50 fill up, the gas station receives only around 80 cents. (Your local gas station makes more selling soda and half-smokes than on gas.) Instead, two-thirds of the money you spend on gasoline goes to one place – oil companies.  Out of the $22,000 spent on gas over the lifetime of an average vehicle, oil companies rake in about $15,000, or 68 percent.

It doesn’t help your retirement bottom-line. While your gas expenditures certainly help the bottom line of oil companies, they don’t help you – even if you own stock in oil companies.  If you own an average retirement portfolio that includes $20,000 in oil company stock, after spending close to $2,000 on gas over the course of a year, your oil company stock would yield far less than a penny in return.

Using less oil always pays dividends. Whether you want to invest in oil companies is up to you, but regardless of the number of oil company shares you own, spending money on gas is not a worthwhile investment.  Reducing your oil use, on the other hand, pays major dividends.  You can save thousands by investing in a fuel efficient vehicle, and save even more by investing in a hybrid vehicle, even after paying for the upfront cost of the hybrid technology. While you may pay $3,500 more for a fuel-efficient vehicle like a Ford Fusion SE Hybrid, you’ll save nearly $9,000 in fueling costs over its lifetime. So which would you prefer, a penny growth in your stock or thousands more in your pockets?

We can 1/2 it!  Reducing our oil use is a smart strategy for our pocketbooks, for the climate and our health. Putting efficient technologies and innovative solutions to work, we can cut our projected oil use in half—saving more than 11 million barrels of oil every day by 2035. The oil industry is doing all it can to block progress, so to get to Half the Oil, we need to build a strong and diverse chorus of voices demanding action.

Let’s start by sharing the key findings of this new report with family, friends and colleagues, so we can all better understand where our gas money really goes and what we can do about it.  Will you join us?

Top image: Image: Flickr Commons; coconut wireless

Posted in: Energy, Fossil Fuels, Vehicles Tags: , , ,

About the author: Michelle Robinson has more than 25 years of experience in public policy and advocacy. She joined the Clean Vehicles program in 1992 and is a nationally recognized expert on state and federal transportation policy. See Michelle's full bio.

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6 Responses

  1. Ann Goggin says:

    While I applaud the effort to identify where does our gas money go, to leave out gas taxes undermines the credibility of the analysis to the average reader. While I understand that state gas taxes vary, you could still use the average. And do those gas taxes go into the general fund, or strictly into funding for roads and bridges? I hope you will revisit this analysis, as I would love to share it on our website. But not without seeing that breakout.

  2. Robert Daigle says:

    The potential gain to an individual from owning oil company stocks is mainly from anticipated capital gains accruing from an increase in the stock price over time. So the argument about miniscule dividends ignores a major part of the expected return on investment.

    I think a more revealing metric about oil company finances would be the average amount of profit that the oil companies get from our average $2,000 per person annual expenditures on gasoline. – Bob Daigle

  3. Michelle Robinson says:

    Brian, Jim – thank you for your comments.

    First, the report was based on U.S. Energy Information Agency data, which breaks down what you pay for in a gallon of gasoline into 4 categories; crude oil, taxes, distribution and marketing (one category), and refining. See http://www.eia.gov/petroleum/gasdiesel/. Of course taxes on gasoline vary from state to state, but in order to achieve an accurate reporting of where the $50 an average American, not an average Virginian, or New Yorker, spends at the pump goes, we utilized a monthly national average of federal and state taxes applied to gasoline or diesel fuel. Our goal was a clear and uniform way of presenting the data, instead of writing 50 state-specific breakdowns.

    Second, oil companies receive such a disproportionate share of what we pay for in a $50 fill up because they are involved in every step of the process it takes to get oil from the ground to your gas tank. Separating revenue from profits when it comes to the entire chain of operations involved in global oil extraction and sales is tricky, but we looked at a single company to get some idea. ExxonMobil, for example, reported profits after taxes of just under a dollar per gallon of oil it produced in 2011 (what they call upstream earnings). Keep in mind these are profits that come from the entire “upstream” business (i.e., business related to exploration and extraction of oil and natural gas). So, while your local gas station only makes pennies off each gallon, Exxon receives nearly a dollar per gallon from upstream earnings. The details of how we calculated this are in the appendix of our report, and we used data directly from Exxon’s own annual report. See http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-reportsannual.

  4. Jim Vance says:

    I also think the presentation of allocated costs is misleading insofar as the amount attributed to taxes, as it is presented as a fixed/constant figure when that isn’t the case. Although the Federal motor fuels tax is fixed and constant across all 50 States and territories, it varies with the specific type of fuel (gasoline, diesel, natural gas). The tax increment which is imposed by the individual State (or territory, if allowed) also varies by type of fuel and is set by each State Legislature so that introduces yet another source of variance from State to State by potentially a significant amount. An overview of the motor fuels taxation regimes across many different countries and across the various US States and Territories can be found in or at links provided within the following Wikipedia article.

    https://en.wikipedia.org/wiki/Motor_fuel_tax

    While the study is commendable in attempting to demonstrate the specific economic return characteristics of supply chain participants, it’s far too simplistic and so intrinsically devolves into a propaganda piece because of those embedded flaws.

  5. Brian Worth says:

    This article is very misleading. Why not report the cost of product and operations for the oil companies separately? I read in the news that oil is $118 per barrel. At 40 gallons of petrol per barrel, that is $2.95 per gallon, or about 75% to 80% of the retail price. Data from California is much better http://energyalmanac.ca.gov/gasoline/margins/index.php and shows Oil company profits to be less than taxes.

    If the aim of the article was to make people more aware of efficiency, I don’t understand why the data has to be misleading them to think that the Oil companies are the bad guys. As a scientist myself, I find this very untruthful.