Democrats Demand Action on ‘Hot’ Fuel

By Sean McNally, Senior Reporter

This story appears in the June 18 print edition of Transport Topics. Click here to subscribe today.

WASHINGTON — Congressional Democrats said steps need to be taken to ensure that U.S. consumers are not getting shortchanged by “hot” fuel, but representatives of the fuel retailing industry said adjusting sales by temperature was unnecessary and would hurt small businesses.

“People are paying for gasoline they are not getting,” said Rep. Dennis Kucinich (D-Ohio), chairman of the House Oversight and Government Reform Committee’s panel on domestic policy, during a June 8 hearing.

“This is Big Oil’s double standard.”

Rep. Diane Watson (D-Calif.) said the committee “must take action on this issue.”

The hot fuel issue has spawned a contentious debate since a series of news reports highlighted the expansion of fuel at higher temperatures last year.

Typically, fuel is sold at the wholesale level at 60 degrees Fahrenheit, or the equivalent of 60 degrees, pending the expansion or contraction of the li-quid because of temperature. However, fuel sold by retailers is generally not adjusted for possible changes (9-18, p. 1).

“Each gallon [sold above 60 degrees] that’s measured by volume has less energy inside it,” John Siebert, project leader with the Owner-Operator Independent Drivers Association, said at the hearing. “Internal combustion engines run on energy, not volume.”

Siebert estimated that retailers “made an additional $2.3 billion off of hot fuel sales last year."

“This reminds us old timers about making sure that the meat cutter kept his thumb off of the scale when selling us a pound of hamburger,” he said. “Fuel retailers are meat cutters, their thumbs are on the scale and they’re ripping off American consumers some $2.3 billion each year.”

But R. Timothy Columbus, general counsel for both the National Association of Convenience Stores and the Independent Gasoline Marketers of America, said, “The claims that Big Oil is doing something nefarious here are misdirected.”

“The reality is, this isn’t about Big Oil,” Columbus told the committee, “this is about Little Oil.”

Columbus said large integrated oil companies “own and/or operate less than 10% of all the retail [fuel] outlets in the United States.”

Small retailers, Columbus said, see very little profit, relative to the cost of temperature compensation equipment, noting that the average convenience store last year “made under $34,000 in pre-tax profit,” while the cost of pump retrofits may run between $8,000 to $12,000 per store.

“If you put that kind of capital requirement up, you’re going to see the marginal outlets leave,” he said.

A coalition called the Partnership for Uniform Marketing Practices, which includes NATSO — formerly the National Association of Truck Stop Operators — American Trucking Associations and a number of oil industry groups, wrote to the committee asking the members “to suspend further congressional action, pending the outcome of the National Academy of Sciences study; consideration of the issue by the National Conference of Weights and Measures; and a new study being requested by the state of California on the matter.”

“As I read this letter, I got angrier and angrier because basically, what they say is, ‘Slow the process down. Suspend everything. We’re going to study this. And we’re going to study this some more,’ ” said Rep. Elijah Cummings (D-Md.). “We need to look at this and address it in an urgent fashion.”

No Republicans attended the hearing, but a group wrote in a memo that it “does not accept the conclusion that this known physical phenomenon necessarily acts as a fraud on consumers.”

In addition, several representatives of oil companies were invited to the hearing but declined

to attend.

Afterward, Kucinich did not rule out the possibility of hot fuel legislation but said he wanted to wait until after the National Conference on Weights and Measures addressed the issue and he spoke with more industry representatives.

“Let’s involve the industry before we start talking about legislation,” he said.

Michael Cleary, chairman of the NCWM, told the committee during the hearing the standards group could vote on whether to endorse automatic temperature controls for fuel pumps at its annual meeting next month.

Kucinich noted his staff had conducted a study of hot fuel before the hearing that showed the phenomenon could cost gasoline consumers $1.5 billion.

“Our calculations reveal that 518.7 million gallons of gasoline sold in the summer [of] 2007 will be attributable to the thermal expansion of gasoline,” the study said, “and that consumers will pay a hot fuel premium this summer in the range of $1.5 billion.”

However, the study did not have data from North Dakota, South Dakota, Minnesota or Hawaii.

(Click here for previous coverage.)