The real cost of fuel temperature

| September 05, 2007

The “hot fuel” controversy is getting hotter. The Owner-Operator Independent Drivers Association has launched a website, www.turndownhotfuel.com, intended to educate truckers and motorists about the issue, but really it’s pretty simple. The standard volume for a gallon of fuel is 231 cubic inches at 60 degrees in the continental United States. Retail pumps don’t adjust volume output according to the fuel’s temperature, which varies widely by region. Thus, truckers and motorists filling up with 70-degree fuel, which is slightly expanded, get less energy than is supposed to be in a standard gallon, and those filling up on 40-degree fuel get a great deal more energy.

There is much political rhetoric surrounding the hot-fuel debate and the rising average temperature in the United States. Numerous very large monetary figures have been bandied about to support the contention that drivers are being bilked – $1.5 billion lost by consumers this summer, for instance. But depending upon your area of hauling, losses may vary widely and could even be net gains.

The key to determining loss or gain from fuel-volume expansion and contraction is in knowing the temperature of fuel when it is delivered to the consumer, as emphasized by Michael Cleary, chairman of the National Conference on Weights and Measures. In a recent “hot fuel” hearing in the U.S. House of Representatives, a coordinator at the National Institute of Standards and Technology, Richard Suiter, referenced data collected by a manufacturer of fuel storage tank monitoring equipment that concluded a 64.7-degree average temperature of product in tanks in the United States, averaged annually. That’s about 10 degrees higher than average surface temperature, and an analysis of average air temps and tank temps by state reveals that monthly tank temps track roughly to monthly air temps in any given state, at an average annual difference of 11 degrees.

The map illustrates the potential real costs to owner-operators and trucking companies, based on average state diesel prices published in Truckers News (monthly figures from T-Chek Systems) between May 2006 and April 2007 and monthly state temperature averages recorded by the National Oceanic and Atmospheric Administration in the same period, adjusted to estimate average tank temp.


Prelude to a Mandate?
Membership in the National Conference on Weights and Measures voted at the organization’s July meeting in Salt Lake City on a measure to allow the adoption by states of an NCWM-built model fix to permit the use of automatic temperature compensation devices in the retail arena. Though majorities of state regulatory representatives in both of the NCWM’s houses voted to mandate ATC devices, both houses fell short of the 27 votes each would need to constitute a solid majority and hence pass the measure.

At a June 8 hearing in the House of Representatives, now-former NCWM chair Michael Cleary revealed under questioning that there were passionate interests on both sides of the issue among NCWM voting participants, who come from state weights and measures regulatory bodies.

The United States does not having a centralized regulatory authority in weights and measures.

Cleary “had to work long and hard against three of his predecessors,” says OOIDA’s John Siebert, to get the ATC measure to a vote. The incoming chair of the NCWM is Judy Cardin of Wisconsin, who’s recognized the importance of the issue but who, according to Siebert, spoke against the recent measure and likewise voted that way. But there were some, Siebert says, “who voted against this particular proposal who also defended [temperature compensation] philosophically.”

In July 2006, air temps in Utah averaged 76.4 degrees Fahrenheit – estimating storage-tank temp, truckers averaged 2 cents a gallon in energy losses that month. Conversely, in January this year, average air temp bottomed out at 20, netting a 3.7-cent gain per gallon.

Hearings in June and July before the House Domestic Policy Subcommittee of the Committee on Oversight and Government Reform, chaired by Dennis Kucinich (D-Ohio), examined the hot fuel issue. At each, held June 8 and July 25, the particular issue under examination was whether automatic temperature compensation devices ought to be mandated on retail fuel pumps. At bulk levels worldwide, and at the retail level in Canada on most pumps, ATC devices are typically used.

John Siebert, OOIDA’s hot fuel project leader, urged fuel retailers to take up what he deemed the most fair solution: “Apply the same technology used throughout the petroleum production and distribution industry to the final fuel transaction, the retail sale,” he said. “Automatic temperature compensation pumps are available for use throughout the world.” When selling and buying in bulk quantities, oil companies and fuel retailers typically adjust volume according to temperature.

The initial hearing was announced under the title “Hot Fuel: Big Oil’s Double Standard for Measuring Gasoline.” The Partnership for Uniform Marketing Practices (P.U.M.P.), of which NATSO is a member, entered testimony for consideration by the subcommittee stressing that the issue was not one of “big oil versus the truck driver/consumer.” Timothy Columbus, general counsel for the National Association of Convenience Stores and the Independent Gasoline Marketers of America, agreed with the coalition, stressing that “this is not about big oil. This is about little oil.”

Hugh Cooley, Shell’s vice president and general manager of national wholesale and joint ventures, reiterated the sentiment in his testimony before the subcommittee July 25, going on to argue that the proper place for the debate about temperature compensation was in the National Conference on Weights and Measures and that fuel prices are “intensely competitive and localized,” he said. “This intense competition necessarily adjusts prices to take into account the effect of temperature variations on retail [fuel] sales. Shell similarly believes based on economic principles that, if [fuel was] temperature-adjusted at the retail level, the intense competition in the market would adjust prices to take that into account as well.”

“Big oil owns and operates less than 10 percent of the retail [fuel] outlets in the United States,” Columbus said on June 8. He cited estimates from NACS that more than half of convenience stores in the U.S. were single-store operations. John Siebert estimates a maximum cost of $2,000 to retrofit a digital pump with an ATC device, $4,000 to retrofit a mechanical pump.

P.U.M.P. urged restraint in lawmaking pending outcomes of a study urged by Rep. Bart Gordon (D-Tenn.), chair of the House Science and Technology Committee, to the National Academy of Sciences, which would analyze the real costs of installation to consumers. P.U.M.P. and others have suggested that temperature compensation of fuel would ultimately impose costs that would further hike the per-gallon fuel price.

“Before we impose potentially crippling costs on retailers, consumers and state authorities, government has a duty to ensure there is compelling data to support such a radical change in how fuel is dispensed in this country,” NATSO President and Chief Executive Officer Lisa Mullings said.

Diesel purchases in Maryland and Virginia, per Truckers News estimates, netted truckers an estimated average loss of 0.7 cents per gallon between May 2006 and April 2007.


Lawsuits Consolidated In Kansas
On June 18, the federal Judicial Panel on Multidistrict Litigation united numerous “hot fuel” lawsuits filed around the country under a single jurisdiction in Kansas. The suits included one filed in December in the Northern California District by attorneys seeking class status for owner-operator Mark Rushing, et al, in which the Owner-Operator Independent Drivers Association played a large part.

The decision on whether to grant the plaintiffs class status now will be made by Judge Kathryn H. Vratil, who at press time had not issued a time frame for any rulings.

On average, estimated yearly fuel temperature in Kansas has tracked just above the 60-degree standard, resulting in a net loss between May 2006 and April 2007 of less than a cent per gallon.


Big Oil or Little Oil?
Hearings in June and July before the House Domestic Policy Subcommittee of the Committee on Oversight and Government Reform, chaired by Dennis Kucinich (D-Ohio), examined the hot fuel issue. At each, held June 8 and July 25, the particular issue under examination was whether automatic temperature compensation devices ought to be mandated on retail fuel pumps. At bulk levels worldwide, and at the retail level in Canada on most pumps, ATC devices are typically used.

John Siebert, OOIDA’s hot fuel project leader, urged fuel retailers to take up what he deemed the most fair solution: “Apply the same technology used throughout the petroleum production and distribution industry to the final fuel transaction, the retail sale,” he said. “Automatic temperature compensation pumps are available for use throughout the world.” When selling and buying in bulk quantities, oil companies and fuel retailers typically adjust volume according to temperature.

The initial hearing was announced under the title “Hot Fuel: Big Oil’s Double Standard for Measuring Gasoline.” The Partnership for Uniform Marketing Practices (P.U.M.P.), of which NATSO is a member, entered testimony for consideration by the subcommittee stressing that the issue was not one of “big oil versus the truck driver/consumer.” Timothy Columbus, general counsel for the National Association of Convenience Stores and the Independent Gasoline Marketers of America, agreed with the coalition, stressing that “this is not about big oil. This is about little oil.”

Hugh Cooley, Shell’s vice president and general manager of national wholesale and joint ventures, reiterated the sentiment in his testimony before the subcommittee July 25, going on to argue that the proper place for the debate about temperature compensation was in the National Conference on Weights and Measures and that fuel prices are “intensely competitive and localized,” he said. “This intense competition necessarily adjusts prices to take into account the effect of temperature variations on retail [fuel] sales. Shell similarly believes based on economic principles that, if [fuel was] temperature-adjusted at the retail level, the intense competition in the market would adjust prices to take that into account as well.”

“Big oil owns and operates less than 10 percent of the retail [fuel] outlets in the United States,” Columbus said on June 8. He cited estimates from NACS that more than half of convenience stores in the U.S. were single-store operations. John Siebert estimates a maximum cost of $2,000 to retrofit a digital pump with an ATC device, $4,000 to retrofit a mechanical pump.

P.U.M.P. urged restraint in lawmaking pending outcomes of a study urged by Rep. Bart Gordon (D-Tenn.), chair of the House Science and Technology Committee, to the National Academy of Sciences, which would analyze the real costs of installation to consumers. P.U.M.P. and others have suggested that temperature compensation of fuel would ultimately impose costs that would further hike the per-gallon fuel price.

“Before we impose potentially crippling costs on retailers, consumers and state authorities, government has a duty to ensure there is compelling data to support such a radical change in how fuel is dispensed in this country,” NATSO President and Chief Executive Officer Lisa Mullings said.

Diesel purchases in Maryland and Virginia, per Truckers News estimates, netted truckers an estimated average loss of 0.7 cents per gallon between May 2006 and April 2007.

Near-solid red areas on the map, such as in Texas, represent a cents-per-gallon loss, while near-blue areas, such as in Maine, represent a cents-per-gallon gain. Near-pure yellow areas, such as the west-to-east swath from Washington to Pennsylvania, track closely to net zero for the hot (and cold) fuel effect. To estimate the value of your own energy gain or loss, multiply the state’s cents-per-gallon number in the chart on page 36 by the number of gallons you bought there last year and convert to dollars. If the state’s bar is to the right, that’s money in your pocket. If to the left, it’s an average loss. At 120,000 miles a year and 6 mpg, a driver buying equal amounts of fuel in Texas, Oklahoma, Kansas, Nebraska and North and South Dakota loses on average $106 in energy yearly. The colder areas in the Dakotas help to offset the losses in the South. Local factors in various stations may have different effects on real results. Filling stations within immediate proximity of refineries may result in fuel that’s even warmer than average, for instance. Double-walled fiberglass insulated tanks, used more often in recent years, keep fuel at whatever temp it is delivered for much longer than traditional tanks, reducing station locations’ effect on fuel temp.

The northern and southern extremes of the country represent the highest potential losses and gains for the trucking industry associated with hot or cold fuel. In Florida, an average 2.7 cents per gallon worth of diesel is lost. In Maine, close to a full cent per gallon is gained.


A Real-World Case
Chattanooga, Tenn.-based independent owner-operator Michael Goodman’s 2006 IFTA figures indicate he spent most of his time in the fourth quarter on the road in the southern states, logging the heaviest mileages in Alabama, Texas, Georgia and Tennessee. It was a rather chilly quarter, and diesel prices were headed down, but fuel volume fluctuations still cost him an average total of $2.88 worth in energy over the period. In the steamy third quarter, an expensive period for fuel, logging half the miles but running exclusively in the south (northernmost point: Virginia), the total value of energy Goodman lost due to volume fluctuations was $18.29.

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