From the Pump to Profits: Where Your Gas Money Goes

February 4, 2013 | 12:14 pm
Michelle Robinson
Former Contributor

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