Murdoc has a post up that he claims shows where the real gouging is at the gas pump. His analysis shows $0.08 per gallon profit to the oil company, $0.01 per gallon profit to the gasoline station operator and $0.59 per gallon of taxes. His numbers come from this article at the New Media Journal via this post at Wizbang.
He goes on to ask "Why aren't we hearing this side of the story?"
Unfortunately, Murdoc has been snookered by a clever trick. The nutjobs at the New Media Journal waved their hands and decided to conveniently ignore the largest profit item in the oil business: exploration and extraction.
Here are the numbers Murdoc is working off of:
Notice how the profit he is discussing only includes the profit on refining and delivering gasoline to the customer. It completely ignores the profit associated with extracting crude oil from the ground and delivering it to refineries. The $1.71 of crude costs assumes $0 in profit. Because it is the cost of crude which is currently driving gasoline prices, of course one does not find excessive profits if one only focuses on the refining and delivery component of the equation.
Here's what the graph would look like if you included extraction profit. In these numbers I am assuming that the $1.71 for crude is based on $70 per barrel crude. Also that extraction costs are approximately $40 per barrel of crude — a number that both sounds about right and that I think I remember hearing on the radio. Considering recent historical per barrel prices, I sincerely doubt crude extraction costs any more than that. There's a lead time to developing oil fields and no one was assuming much above $50 per barrel prices a couple years ago. (What I mean by that is that no one would have green-lighted the development of an oil field where extraction would cost more than $40, so there are likely to be few, if any, fields where the costs are that high). So, bottom line, I am assuming $30 of profit for every barrel of oil, or approximately 43% of the cost of crude, resulting in $0.73 of profit for every gallon of gasoline.
So profits currently dwarf taxes. And, furthermore, taxes have not changed in years, so it is certainly not taxes that are driving the change in gasoline prices.
Update: I meant to address this comment by Murdoc, as well:
Big Oil puts out the money to make it all happen and reaps eight cents. Government does virtually nothing whatsoever and simply collects fifty-nine cents every time we pass 'Go'.
Government uses that money to build and maintain the transportation infrastructure. Hardly "nothing whatsoever".