The amount of profit that an oil company makes on a gallon of gas can vary widely depending on a variety of factors, including the cost of crude oil, transportation and refining costs, taxes, and the competitive landscape within the gasoline market.
It is difficult to determine exactly how much profit oil companies make on a gallon of gas, as this information is typically not publicly disclosed. However, it is possible to estimate the average profit margin for gasoline sales based on publicly available data and industry analyses.
According to the US Energy Information Administration (EIA), the average price of a gallon of regular gasoline in the United States as of October 2021 was $3.42. Of this price, roughly 57% went towards the cost of crude oil, 22% went towards federal and state taxes, and the remaining 21% went towards refining, distribution, and marketing costs.
Based on this breakdown, it is clear that the vast majority of the cost of gasoline is related to the price of crude oil, which is set on a global market and can fluctuate widely depending on a variety of factors, including supply and demand, geopolitical tensions, and weather patterns. This means that oil companies’ profits on gasoline are largely determined by the price of crude oil.
In general, oil companies’ profit margins on gasoline tend to be relatively low. According to a 2020 report by the Oil Price Information Service (OPIS), the average profit margin for a gallon of gasoline sold by a US oil company in 2019 was just under 10 cents per gallon. This figure includes both integrated oil companies, which are involved in all aspects of the oil and gas industry, and independent retailers, which primarily sell gasoline and related products.
It is important to note, however, that profit margins can vary widely among different companies and regions. For example, a 2018 study by the nonprofit organization Consumer Watchdog found that ExxonMobil, one of the largest oil companies in the world, had an average profit margin of 16 cents per gallon of gasoline sold in California, which is a highly regulated and competitive market. In contrast, smaller independent retailers may have lower profit margins due to higher costs of transportation and other overhead expenses.
Additionally, some experts argue that oil companies’ profits on gasoline should be viewed in the context of their overall profitability. While gasoline sales may be a relatively small portion of an oil company’s total revenue, these sales can still contribute significantly to their overall profits. For example, in 2020, ExxonMobil reported net income of $7.7 billion, down from $14.3 billion in 2019, due in part to lower demand for gasoline during the COVID-19 pandemic.
In summary, the amount of profit that an oil company makes on a gallon of gas can vary widely depending on a variety of factors, including the cost of crude oil, transportation and refining costs, taxes, and the competitive landscape within the gasoline market. While profit margins on gasoline sales tend to be relatively low, they can still contribute significantly to an oil company’s overall profitability.