Press Release

"Hot Fuel" Fix Urgent

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Thu, May 22, 2008 at 12:42 pm

    "Hot Fuel" Fix Urgent

    NEWS RELEASE

    Zooming Oil Price Makes "Hot Fuel" Fix More Urgent as Memorial Day Approaches

    Consumer Groups Criticize Oil Industry Resistance to Fixing
    Hidden Charge at Pump That Costs U.S. Drivers Close to $3 Billion Yearly

    Washington, D.C. — As Memorial Day kicks off the summer driving season
    and gas prices scrape and sometimes exceed $4 per gallon, U.S. auto and
    truck drivers are paying $3 billion a year in hidden charges at the
    pump for fuel that expands and loses value as it heats up. (For
    information on audio news conference at 11:30 a.m. see note at end of
    release.)

    "A ‘hot fuel’ surcharge of up to a dime a gallon is concealed from
    motorists because they have no way to tell if the fuel they’re buying
    is 60 degrees, 90 degrees or more," said Judy Dugan, research director
    of the nonprofit, nonpartisan Consumer Watchdog. "Fuel at gas stations
    across the street from one another can vary by 10 or 15 degrees, so
    drivers have no way to judge the actual value of what they’re buying,
    no matter what the posted price."

    The nation’s leading advocate for independent truckers, the Owner
    Operator Independent Drivers Association (OOIDA), is also protesting
    the failure of national regulators to fix this rip-off in the face of
    oil industry lobbying. A number of individual truckers are pursuing a
    national lawsuit against the deceptive practice.

    "The hot fuel scam costs our members at least hundreds of dollars per
    year," said John Siebert of OOIDA. "Fuel prices are adjusted for
    temperature at every point in the sales chain except the final one to
    consumers. It’s high time to end this hidden oil industry subsidy."

    Gasoline is sold by volume, and it expands as the temperature rises,
    a bit more than 1% for every 15 degree Fahrenheit increase in
    temperature. A century-old oil industry standard fixes the assumed
    temperature at point of sale at 60 degrees. Yet the average year-round
    temperature of gasoline sold in the U.S. today is near 65 degrees.
    Summertime temperatures are often drastically higher, especially in
    warm states. At 90 degrees, a 20-gallon fill-up costs a driver $1.60
    more than it should, because the expanded "hot fuel" loses energy.

    A comprehensive investigation by the Kansas City Star published in
    August 2006 estimated that U.S. consumers are shorted about 760 million
    gallons of gas and diesel per year by hot fuel sales. At the current
    average national price of $3.81/gallon, (for today’s prices see www.fuelgaugereport.com), that’s $2.88 billion per year. As U.S. prices increasingly cross the $4 barrier, the hot fuel tab will exceed $3 billion.

    At current prices, in hot months in Western and Southern states, car
    drivers pay an extra 7 cents to 9 cents per gallon. Even in the
    unlikely event that the 18.4 cent a gallon federal gas tax was
    suspended for the summer, drivers would be paying half their savings
    back to oil companies for hot fuel that has been robbed of its full
    energy value.

    "Adjusting fuel price to temperature is a matter of simple fairness,"
    said Joan Claybrook, President of Public Citizen. "Sending customers
    away with less than they paid for is unacceptable in any industry."

    Simple, moderately priced technology that adjusts the price at the pump
    to account for temperature has existed for decades. In Canada, where
    average gasoline temperatures are lower than 60 degrees, the oil
    industry lobbied for, and obtained, the right to adjust price to
    temperature so consumers wouldn’t benefit from "cold gas." In the U.S.,
    however, the industry has lobbied successfully against state
    legislation or national regulations mandating temperature-adjusted
    pricing.

    "The oil industry has taken a classic "heads-we-win-tails-you-lose"
    position when it comes to temperature-based differences in fuel value,"
    said Judy Dugan, research director of the nonprofit, nonpartisan
    Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer
    Rights). "In the U.S., oil companies and gasoline marketers argue that
    retail temperature-adjusted pricing is unnecessary, even though the
    dealers buy wholesale gasoline with a temperature adjustment. In
    Canada, they have been more than willing to install retail temperature
    adjustment, prompted only by their own profit calculations."

    In February, a Federal District Judge in Kansas City denied a motion to
    dismiss the national "hot fuel" lawsuit. Sen. Claire McCaskill of
    Missouri is sponsoring legislation that would require retail
    temperature adjustment over a period of several years.

    Independent truckers are hit hardest by the hot fuel premium (large
    trucking companies buy their own fuel in bulk and demand that it be
    temperature adjusted). The Owner Operator Independent Drivers
    Association, based in Missouri, supports the hot fuel lawsuit.

    – 30 –

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