WSJ Op-Ed Uses Debunked Exxon Talking Point To Obscure Massive Oil Profits

WSJ Op-Ed Uses Debunked Exxon Talking Point To Obscure Massive Oil Profits


Source: Energy Information Administration

In a Wall Street Journal op-ed, Drew Johnson of the Taxpayers Protection Alliance claimed that "government makes far more from gas sales than all of the oil companies put together," citing an ExxonMobil statistic that independent fact-checkers say is "not true."

Last spring ExxonMobil's Ken Cohen wrote that the company "earned about 7 cents" for every gallon of gasoline sold in the United States. He contrasted that number with "the 40 to 60 cents per gallon that went from gasoline consumers to the government (state and federal) in gasoline taxes." The conservative media have seized on the statistic to downplay industry profits and defend tax breaks for oil and gas producers. In today's Wall Street Journal, Johnson repeated Exxon's figures, saying:

[G]overnment makes far more from gas sales than all of the oil companies put together. Exxon, for example, made only seven cents per gallon of gasoline in 2011. That's a drop in the bucket compared to the nearly 50 cents per gallon that federal, state and local governments rake in on an average gallon of gas pumped in the U.S.

But examined these claims and concluded that "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." According to Energy Information Administration economist Neal Davis, trying to determine such a figure would be "heroic at best" and "sadly misinformed ... at worst."

So does the government really "rake in a larger profit at the pump" than oil companies? The federal government certainly doesn't. According to the Congressional Research Service, the five major oil companies made almost $133 billion in profits in 2011. Exxon alone made more than $41 billion. By contrast, the federal gas tax generated $24 billion in revenue for the Highway Trust Fund in 2011.

The conservative media like to complain about high gas taxes, but the U.S. has a significantly lower federal gas tax than other industrialized countries. According to a CNN commentary, "Only two countries -- Kuwait and Saudi Arabia -- charge lower gas taxes than the U.S. and both are net global oil suppliers, not consumers." The following chart from The Economist demonstrates this disparity:

Source: The Economist

And while Johnson claims that gas taxes are "on the rise in many parts of the country," the federal gas tax of 18.4 cents per gallon has not been raised since 1993, and many state gas taxes have not been adjusted for inflation. As a result, federal and state transportation departments are struggling to keep up with the rising costs of infrastructure. A CNN commentary noted:

Taking inflation into account, the gas tax has eroded to only 11 cents today. This has seriously diminished the ability to pay for infrastructure, with a purchasing power of 45 cents in gas taxes for every dollar in national highway construction costs. This means that only one-half of the transportation investments made since 1993 could be afforded today, even though GDP has grown 55% and demands (vehicle miles traveled) have grown 29%.

Posted In
Environment & Science, Energy
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