What if, instead of gas prices going up for everybody, oil companies simply made less money
— Dave Levitan (@davelevitan) March 8, 2022
Time for some math (updated because my original numbers were off and I had to fix my math):
ExxonMobil is the largest oil producer in the United States.
Last year they made $23 billion in profits.
They produced 38 billion gallons of gas.
$23B in profit for 38B gallons is about $0.60 per gallon profit.
I know that gasoline is not their only product so there are other, often much more profitable products (such as chemical feed stocks for plastic manufacturers) that also add into the oil industry’s profits.
Across the industry, and remember that I’m a chemical engineer who worked in an oil refinery, the profit margin on pump gas is roughly five cents per gallon.
I worked for a refinery that bought oil and owned no wells. The margin on that was $0.05 per gallon.
That’s what I did. We optimized and optimized to suck every fraction of a cent of profit out of our product. If we Gould gain a tenth of a penny per gallon, that was big money for us.
For oil companies that do oil extraction, their margins are wider because they are vertically integrated from crude to pump.
So let’s say this Blue Check got his wish and the oil industry agreed to cut their profit margin by 50%.
He would save between two and thirty cents per gallon depending on if he bought from an oil producer or stand alone refiner.
In his Prius with an 11 gallon tank, he’d save between $0.22 and $3 per tank.
But that wouldn’t allow him to make profound statements on Twitter.
To understand Blue Checks, you need to understand the Dunning-Kruger Effect and that these people are the sages who live high atop Mount Stupid.