The real cost of fuel temperature

| September 05, 2007

“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.

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