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AZ Shortchanged By The Heat | Oil Watchdog

AZ Shortchanged By The Heat

Fri, Aug 31, 2007 at 11:05 am

    AZ Shortchanged By The Heat

    The Arizona Republic (Phoenix)
    August 31, 2007

    by Ryan Randazzo, The Arizona Republic



    Each time drivers fill their fuel tanks in Arizona’s simmering summers, they likely see $1 or more evaporate.

    Because gasoline expands in the heat, that’s the estimated dollar amount of energy they purchase but they never receive.

    Nobody serves hotter gas than stations in the Arizona desert,
    and after more than a year of discussion, debate over the issue is
    beginning to boil.

    The state Department of Weights and Measures is taking fuel
    temperatures at gas stations and considering voluntary temperature
    compensation, while consumer advocates are pushing aggressively for

    When gas heats up, it takes up more space but doesn’t provide
    any more energy. That means there is less energy in a tank full of
    105-degree gas than the same tank filled with 70-degree gas. However,
    stations charge by the volume of gas they sell, not how much energy it

    "Arizona is the epicenter of hot-fuel rip-offs," said Judy
    Dugan, a founder of OilWatchdog.org, which is calling for gas stations
    to compensate for the temperature of gas they sell. "With the weather
    Phoenix is experiencing now, every time you fill the tank, you could be
    losing a dime a gallon. It’s an extra penalty for living in the desert
    imposed on you by the oil companies and oil refineries."

    Major oil companies and independent station operators argue
    that retrofitting pumps and compensating fuel sales for temperature
    won’t save consumers money and oppose moves to require such equipment
    or even allow it in the marketplace.

    At least 38 lawsuits have been filed nationwide against gas
    stations and oil companies. Earlier this month, Sen. Claire McCaskill,
    D-Mo., introduced legislation that would require new and upgraded pumps
    to use temperature-compensation equipment.

    But things have heated up even more in Arizona:

    – The Arizona Department of Weights and Measures is taking fuel
    temperatures at stations to get a 12-month average but already has
    found summer temperatures of about 104 degrees. Based on that data,
    Valley motorists pay about $1 more for a 15-gallon fill-up than they
    would for the same amount of energy if the gas were 60 degrees, the
    industry standard. That figure rises when prices hit the $3 mark they
    saw earlier this summer.

    – Exxon Mobil Corp. stations owned by the company, not
    franchisees, in Arizona and California have begun putting warning
    stickers on pumps to let people know they don’t compensate for
    temperature, ostensibly a response to the lawsuits.

    – A recent report for the U.S. House found Arizona has the
    highest hot-fuel premium nationwide, based on temperature data
    collected in 2003.

    Local lawsuit:

    Fuel experts have known for decades that gas expands when
    heated, and that trait can benefit or harm buyers and sellers when not
    calculated into transactions.

    The current debate flaredin 2002 when the Missouri-based
    Owner-Operator Independent Drivers Association (OOIDA) representing
    truckers got involved.

    OOIDA began investigating the mileage variances in diesel fuel when truckers suspected fraud.

    The group found that temperature accounted for the different
    mileage truckers were experiencing, even though diesel doesn’t expand
    as much as gasoline when heated.

    Their research and subsequent news coverage prompted dozens of
    class-action lawsuits on behalf of independent truck drivers and
    motorists, all of which are being consolidated in Kansas.

    Among the 38 cases with more than 150 plaintiffs and defendants
    is James Anliker, owner of Jim’s Trucking Inc. in Tolleson. He and
    another Arizona motorist, Christopher Payne, filed their suit in May on
    behalf of everyone who has bought fuel warmer than 60 degrees in the
    state from the nine defendants,
    including Exxon Mobil, Shell, Flying J and Chevron.

    "The defendants have resisted all efforts to change their
    deceptive marketing practices and retrofit service-station fuel pumps
    with temperature-correction devices because the petroleum industry
    profits from the sale of motor fuel to consumers and non-standard,
    non-temperature-adjusted gallons," their complaint says.

    It also criticizes the fact that stations don’t report the
    temperature of fuel being sold so consumers can calculate the purchase

    The complaint also alleges the companies pay taxes on the
    amount of fuel they purchase at the industry standard of 60 degrees and
    could collect more taxes than they remit on the fuel when it is sold
    hotter and, therefore, "obtain a tax windfall at the expense of the

    Solution debated:

    Hot-fuel critics see a double standard, with Canadian gas
    stations compensating for temperature to prevent being left short when
    chilly weather reduces the volume of gas they sell.

    Not to mention the temperature calculations oil companies often use when making shipments and major sales in the U.S.

    For those large transactions, the industry standard is 60
    degrees. That way, companies get an even trade when exchanging 5,000
    temperature-compensated gallons of fuel in California, where it is 90
    degrees, for 5,000 gallons of temperature-compensated of fuel in
    Minnesota, where it is 60 degrees.

    Too costly, industry says:

    But industry representatives say that’s not needed at pumps.

    And spending $2,000 or more per pump to add
    temperature-compensating equipment will only hurt consumers, said
    Andrea Martincic, executive director of the Arizona Petroleum Marketers
    Association, representing the 93 percent of the state’s 2,000 stations
    who are independent.

    "Consumers likely will see a price increase," Martincic said.

    She represented her views in Chicago this week during a National
    Conference on Weights and Measures meeting on the possible pitfalls of
    introducing temperature compensation in the U.S.

    "The advocates for this are assuming the stations will sell
    fuel at the same price with the new equipment," she said. "It’s a
    little misleading to say consumers are losing a dollar or whatever per
    sale. A gallon is a gallon."

    Temperature adjustment also could require more state
    inspectors, increasing fees on stations that could be passed on to

    And if temperature adjustment is simply allowed, not required, it could create unfair competition among stations, she said.

    "There is a risk in rural communities or at older stations,
    where potentially owners just say it’s not worth it," she said. "If we
    don’t know it will help consumers, then why would you move forward with

    Industry opposition:

    Oil companies such as Shell Oil and Exxon Mobil also have argued
    that the cost of adding the equipment to gas pumps would only hurt the
    business owners who run most of their franchises.

    And temperature compensation won’t mean they get more gas to
    fit in their tanks or that stations will lower prices, they said in
    testimony before a special committee of the U.S. House last month.

    "Shell believes that making automatic temperature adjustment
    permissive throughout the United States would not be a good idea," said
    Hugh Cooley, Shell’s vice president and general manager for national
    wholesale and joint ventures.

    "First, if in any given area some stations adopted the
    technology and others did not, consumers would be confused over how to
    compare prices."

    Exxon Mobil provided similar comments but would only reply via
    an informal e-mail when asked by The Republic about the new stickers on
    Arizona pumps. And then the company wouldn’t answer why just two states
    were singled out.

    "(The stickers are) simply a reminder that the dispenser sells
    motor fuel by volume," spokeswoman Prem Nair wrote. "This is how fuel
    has traditionally been sold at retail in the continental United

    Awareness limited:

    Most drivers haven’t yet heard of the issue, even those who take fuel seriously.

    "I didn’t know that," 18-year-old Tim Senzee said while filling
    his pickup this month at a Phoenix QuikTrip as the mercury hit 109
    degrees. "And I drive for a job, and have to pay for my own gas."

    Senzee can write off his delivery-service mileage on his taxes but still watches spiking prices.

    "It definitely is a problem," he said. "It can be pretty annoying."

    Other consumers were a bit cynical about hot-fuel regulation.

    "I don’t think they’ll do it unless there is a law changed," Kay
    Averkamp said as she pumped $27.86 worth of gas into her Honda Prius at
    a Phoenix am/pm station. "I don’t think they’ll do it out of the
    goodness of their hearts."

    But truckers say they see the impact, even though major
    trucking companies such as Phoenix-based Swift Transportation have
    stayed out of the fray.

    "When you don’t get a real gallon of fuel, that’s when it hurts
    my wallet," independent driver Sam Battaglia of Louisville, Ky., said
    recently after putting $170 worth of diesel into his International 9900
    near Nashville.

    "You notice when you fill up, then park overnight and the gauge
    reads less than full in the morning," said Battaglia, a member of the
    independent-truckers group pushing for temperature compensation.

    The state Department of Weights and Measures investigates about
    1,000 complaints a month regarding gas pumps, but it hasn’t taken a
    stance on hot fuel, spokesman Steve Meissner said.

    "The oil industry says it’s too expensive," Meissner said. "So
    we could say, ‘OK, how about a voluntary system where the pump is
    labeled (as compensating for temperature),’ and if they have to charge
    an extra nickel a gallon or so, fine, they could let the market decide
    if it’s worth it."
    Reach the reporter at ryan.randazzo@arizonarepublic.com or (602) 444-4331.

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