When I bike to work I pass two gas stations. One was selling the lowest grade at $4.01 this morning. It’s the first time I’ve seen the low grade above $4. The other had low grade at $3.91. Guess which one I frequent?
It’s a trick question. I don’t frequent either. I go as infrequently as I can. The weather’s nice and I’d rather bike to work.
A few days ago I pointed out that gasoline accounts for 70% of the average gas station’s revenues, but only 30% of its profit.
Now I have additional data to offer. According to the U.S. Energy Information Administration most stations receive only 7 to 10 cents per gallon sold. That’s their revenue. After expenses they’re left with a just a few cents of profit per gallon sold.
Where Does the Rest of the Money Go?
Here’s the breakdown for a $3.04 gallon of gas, according to the Energy Information Administration:
Crude Oil
More than two-thirds pays for the crude oil. It’s the reason that gas prices go up when oil prices go up.
Saudi Arabia can produce a $110 barrel of oil for as little as $1, while a U.S. company drilling in the Gulf of Mexico might spend as much as $70 to produce one barrel.
Taxes
The taxes vary depending where you live. The average state adds 22 cents of gas tax, while the federal government tacks on another 18 cents.
Guess which lucky residents of which lucky state get to pay the highest state tax? Here’s a hint, it starts with ‘C’ and ends with ‘alifornia’. According to the American Petroleum Institute, California adds 45.5 cents per gallon. Yikes.
If you’d like to see your state’s gasoline tax click here.
Ship and Sell
This includes the cost of moving the gas to gas stations via trucks or pipelines.
Refining
Refining is the process of turning crude oil into gasoline. Refining companies have to buy crude oil at market prices. Their bottom line is hurt by high oil prices.
Conclusion
When I buy a gallon of gas most of the money goes to the oil producers. The U.S. oil companies do very well with high oil prices, but it’s the Saudi Arabias of the world that make a killing because of their rock bottom production costs.
The corner gas station makes a few cents per gallon. That’s less than 30 cents when I fill up the Accord.
When I was a kid I filled up my lawn mower a few gallons at a time. It must have barely been worth the wear and tear on the station’s pump - except it was worth it because I bought so many baseball cards at that station.
[…] Let’s say the credit card company charges the gas station a 2% fee. A Honda Accord pulls up and buys 15 gallons. When gas was $2/gallon, the Accord paid $30 for his gas. The credit card company charged the gas station 60 cents for the transaction, or about 4 cents/gallon. The station was left with a few cents of profit per gallon. […]