http://www.chron.com/disp/story.mpl/front/5000228.html Oil execs try to rebuff calls for summer compensation By DAVID IVANOVICH Copyright 2007 Houston Chronicle Washington Bureau -------------------------------------------------------------------------------- WASHINGTON — It's summertime, and the living is easy. But measuring out a gallon of gas for a summer day's drive apparently isn't. The oil companies are again in the hot seat, trying to fend off claims they've been taking advantage of motorists for decades by not taking temperature into account in dispensing fuel during the summer months. The industry has been adjusting for temperature when selling fuel in bulk at the wholesale level since the 1920s. But Hugh Cooley, vice president and general manager of national wholesale and joint ventures for Shell Oil Products Co. in Houston, told a House panel Wednesday such recalculations aren't really necessary at corner service stations, where competition is intense. "Shell does not believe that the American consumers are harmed in any way by not having temperature adjustment at retail dispensers," Cooley said. To better understand the issue, think back to your middle school science class: Heat a liquid and it will expand. Cool a liquid and it will contract. But when measuring out a gallon of gasoline, the oil companies assume a temperature of 60 degrees. Gasoline leaves the refinery gate far hotter than that and tends to stay warm, particularly in sizzling towns like Houston. And at higher temperature — say 90 degrees — that same gallon takes up about 2 percent more space in the fuel tank. The energy content, however, does not increase. And that means the motorist can drive fewer miles on a tank of gas of what's come to be known as "hot fuel." As a result, American motorists will pay a hot fuel premium totaling $1.5 billion this summer, according to a report prepared by Democratic staffers on the House Oversight and Government Reform Committee's Domestic Policy Subcommittee. The physical properties of gasoline have been well known for decades. But with prices at the pump still hovering around $2.95 a gallon nationwide and $2.80 in Houston for regular unleaded, according to the latest figures from AAA, the issue has hit a nerve with the driving public. Over the last eight months, more than 100 companies have been hit with class action lawsuits over the issue, Cooley said. Truckers, in particular, are up in arms. The fact that motorists benefit in the colder months, when fuel temperatures fall below 60 degrees, doesn't cool the criticism. "Where else does a person selling a commodity say, 'It's OK if I cheat you for six months, as long as you cheat me for six months?' " said John Siebert with the Owner-Operator Independent Drivers Association Foundation, in an interview. Besides, the Democratic staffers crunching year-round figures from Texas and most other states found that gasoline temperatures in gas stations' underground storage tanks averaged 66.7 degrees — about 10 percent higher than the base assumption. Rep. Dennis Kucinich, D-Ohio, chairman of the panel and a presidential hopeful, wants gasoline retailers to install devices on their pumps that automatically adjust the amount delivered to account for temperatures different than 60 degrees. Canada began allowing gas station owners to install the devices 15 years ago. And after some companies started using the equipment, most other competitors quickly followed suit. But industry executives argued they aren't allowed to adjust for temperature in the U.S., since states have mandated that gasoline be sold by volume. "Selling temperature-compensated motor fuel at retail would violate current laws and regulations," said Ben Soraci, director of U.S. retail sales for Exxon Mobil Fuels Marketing Co. Texas and 48 other states define a gallon of gasoline as 231 cubic inches of fuel. (Hawaiians like their gallons a bit bigger, at 234 cubic inches). Earlier this month, the National Conference on Weights and Measures considered allowing U.S. service station owners to install the temperature adjustment devices on their pumps. And while a majority of the delegates — including from Texas — approved the proposal, the measure failed to achieve the super majority needed to approve a change. The oil companies point out that independent retail station owners, not the major oil companies, would bear the brunt of the costs of installing the devices, which Shell estimates at $20,000 to $30,000 per site. The Texas Petroleum Marketers and Convenience Store Association estimates adding the devices would cost Texas service station owners upward of $500 million. Cooley argued that as long as all service station owners use the same unit of measurement in a given market, consumers aren't harmed. "The idea that temperature adjustment will somehow give people more for their money simply does not take into account the realities of the retail gasoline market," Cooley said. "If gasoline were temperature-adjusted at the retail level, the intense competition in the market would adjust prices to take that into account as well. In other words, if retailers sell 'larger' gallons, you should expect they would charge more for (those) 'larger' gallons." Cooley also noted that the energy content of gasoline is affected by a number of factors, including the amount of ethanol added to the fuel, the grade of crude that was used and the process employed at the refinery. I'm sure there's a lot of energy expert in this forum to discuss the veracity of this issue. If I buy gas during night time or early morning, when it's cooler, would I get the gallon that I paid for?
I've been hearing a lot about this problem and it seems to me the answer would be to sell gas based on mass and not volume since while the volume expands or contracts the mass would stay the same. I'm not sure though how you would set up the pumps to measure mass since they are designed to measure volume. On a related note I read that many gas pump meters are inaccurate since the mechanical readers wear out. The good thing is though that inaccuracy usually benefits the consumer.
The worst part is that gas sky rockets in the summer in price and now this make it worse since your actually getting less for your money.
It'd be interesting to see how much money is lost by the consumer on this. The average temperature in Houston is something like 67-68 degrees year-round (yeah, I know we probably make longer trips in the summer when it's hotter). I've worked with the software that runs these pumps, so I knew about the "hot fuel" issue, but I'm not sure what it would cost on a per-user basis. I just think we knowingly waste more money on stupider stuff.
Assuming the 2% more space number is accurate, then each gallon would lose about 2% of its value (slightly less but close enough for government work). That means the price should drop 2% or 6 cents on 3 dollar per gallon gasoline. So on a per customer basis, this is not a big deal. Over the summer if you used 1000 gallons of gas it would cost you sixty bucks extra.
I remember this story awhile ago on the news and they said that it does not really matter because most tanks are stored underground at a pretty constant temperature.
