Where Do Your Gas Dollars Go?

Americans pay more for gas than they do for vehicles on average, and the Union of Concerned Scientists has set out to demonstrate exactly where all the money goes.

In a recent study, the UCS claims that “your gas money doesn’t support your local gas station, nor does it benefit you financially, even if you own oil company stock. Most of the money you spend at the pump goes directly to one place: oil companies.”

The UCS breaks it down like this. Of the over $22,000 spent on gas over the lifetime of an average vehicle purchased in 2011 … 

•    oil companies earn about $15,000
•    14% goes to taxes used for roads and public transportation
•    10% goes to refining costs
•    8% goes to distribution and marketing
•    Gas stations aren’t your enemy—they earn only about 3-5 cents on each gallon sold (it’s the snacks they profit from)

Ok, so what does this mean for those who own shares in oil companies? Not much, according to the UCS. The argument is that “even if you had $1 million invested [in a company like ExxonMobil], you would still get less than one cent in return after spending almost $2,000 on gasoline.”

So what’s the point of the UCS report? There’s always an agenda, which in this case is to campaign for fuel-efficient vehicles. After taking the hit on the upfront cost of a hybrid vehicle, you can save thousands in gas costs over the life of the vehicle.

“You have a choice when it comes to your oil use: Continue pumping your money into oil company profits or invest in fuel efficiency and keep the profits in your pocket instead,” the report suggests.

A Ford Fusion SE Hybrid, for instance, costs on average $3,500 more to purchase, but the UCS says the savings in gas would be almost $9,000.

The UCS is sponsoring the “Half the Oil Plan”, which seeks to cut Americans projected us of oil in half in 20 years. Will it work? Well, there has hardly been a better time to pray on the public’s pocketbook sentiment when it comes to gas.

One would assume that as gas prices rise, sales of fuel-efficient vehicles will increase. Over the past five years, there has been a direct correlation between rising gas prices and declining sales of larger vehicles, as consumers opt for smaller cars that burn less gas.

With a $1 rise in fuel prices, pick-up trucks have typically lost about 0.5% in market share, while small cars gained about 0.7% in market share. However, hybrids haven’t benefitted much at all. For the same $1 rise in fuel prices, hybrid cars have gained only 0.2% in market share. Hybrid trucks have actually lost market share for the same rise in fuel prices, according to data from Experian.

By Charles Kennedy for Oilprice.com