Gas Prices at Record Highs - Who's Making the Profit?

According to Time Magazine (June 30, 2008) Argentina currently enjoys the world's lowest gasoline prices at .12 cents a gallon while the East African country of Eritrea is where the highest gas prices will be found, $9.58 per gallon. One dollar buys 8.3 gallons of gas in Argentina. That same one dollar in Eritrea only buys a little more than 1/10th of a gallon.

In Chicago, Chicagoans are currently paying $4.19 for a gallon of gas or about a little less than 1/4 gallon for a dollar's worth of regular gas. While supply and demand are ultimately the primary determinants of a significant portion of the price consumers pay at the pump, what I wanted to know was who takes a share of each dollar I spend on gas and how much of my dollar do they get. What I found out might come as a surprise.

Exxon Mobile, the world's biggest oil corporation makes 9.5 cents on each gallon of gas sold and in the 1st quarter of 2008 not unexpectedly they posted record profits of $8.4 billion dollars, its best 1st quarter ever. I was curious as to how they spent their profits. As reported on ABC's World News Tonight on April 14, 2008, Exxon spent only 30% of its $36 billion, year 2007, profits on exploration and increasing capacity. 15% of those profits went to shareholders in the form of cash dividends and in fact a full 40% of profits was used by the corporation to repurchase its own stock. ABC News asked Professor. John Coffee, Columbia University School of Law about this and here is what he said. "Repurchases tend to raise, tend to spike stock price in a company, which benefits all shareholders and particularly management which hold stock options."

NBC's Nightly News', Lisa Myers, that same evening summed up her report on Exxon's profit spending by saying, "Oil industry officials also argue that some profits are passed on to average Americans who invest in the companies, but critics say in most cases, those dividends won't begin to offset the high cost of gas, and the outrage."

While Exxon Mobile makes 9.5 cents on every dollar at the spent at the pump, the federal government in fact makes 18.4 cents and has since 1993. In addition there are the state and local taxes on gasoline that, on average, take 28.6 cents of every dollar according to first quarter 2008 numbers cited by Wikipedia . Federal, state, and local taxes take .47 cents of each dollar we spend at the pump.

Of each dollar spend at the pump .56 1/2 cents is taken by Exxon as profit or in taxes. That leaves 43 1/2 cents to account for the cost that is past on to the consumer for the cost of the crude oil itself. That figure of 43.5 % of every dollar to cover the cost of the oil is in line with what the Canadian Centre For Energy says about what the average consumer pays for the cost of crude oil. According to the Centre it was 47% of every dollar in 2005 .