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Don't listen to political nonsense on what the oil companies make on gas sales.

Do Oil Companies Earn Just 7 Cents on a Gallon of Gas?

In opposing the Senate bill to repeal tax breaks for oil and gas companies, Paul claimed that the federal government makes more money in taxes on a gallon of gasoline than oil companies earn in profits. He presented a chart that carried the header "Regular Gasoline Tax v. Oil Company Profit, Per Gallon," showing 7 cents per gallon for the oil companies and 18.4 cents per gallon for the federal government. (In his May 17 speech, he said 7 cents and 18.4 cents per dollar, but it was clear from his chart that he meant per gallon.)

But the 7-cents-per-gallon figure grossly underestimates the industry's earnings. It includes only earnings from the sale of gasoline and not earnings on producing and selling crude oil. There are no independent figures on how much oil companies earn on a gallon of gasoline.

Paul's per-gallon figure is consistent with a claim ExxonMobil Vice President for Public and Government Affairs Ken Cohen wrote in his blog, "Perspectives," when the company released its 2011 first quarter earnings in April.

Cohen, April 28: During the first three months of this year, for every gallon of gasoline and other products we refined and sold in the United States, we earned about 7 cents.

We called ExxonMobil and asked how Cohen arrived at his figure. Spokeswoman Kristen Hellmer said it was determined by dividing ExxonMobil's "downstream earnings ($694 million) by the number of gallons of gasoline and other products refined and sold during the quarter in the U.S. (9,355 million gallons). The result is 7.4 cents per gallon." Downstream earnings are what the company earns from refining crude oil into gasoline and other petroleum products and then selling it. But that ignores "upstream earnings," which is how much Exxon earns in producing and selling crude oil. And the cost of oil exceeded $100 a barrel in the first quarter of 2011.

Oil industry analyst Kloza called the 7-cents-per-gallon figure "disingenuous," because it ignores high earnings from oil production. "Bringing crude oil to market has been incredibly profitable," Kloza said. "It is disingenuous to say in the downstream we are making only this much."

ExxonMobil reported that its upstream earnings were $8.7 billion in the first quarter — up $2.9 billion, or 49 percent, compared with a year ago. As of August 2010, it was the third largest oil refiner in the U.S.

In a February 2011 report called "What's Up with Gas Prices?" the American Petroleum Institute reported that on average oil and gas companies earned about "6 cents for every dollar of sales" — not every gallon — in the third quarter of 2010. Rayola Dougher, API’s senior economist, said she arrived at that figure by dividing net income by total revenues for about two dozen integrated oil companies and independent producers. By her unofficial calculations, Dougher said, the average so far in the first quarter of this year is 7.6 cents per dollar of sales. “If you are a producer and getting more money for a barrel your profits go up,” she said.
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