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Warm States' Hot Fuel Lawsuit | Oil Watchdog

Warm States' Hot Fuel Lawsuit

Mon, Apr 28, 2008 at 3:03 pm

    Warm States' Hot Fuel Lawsuit

    Lawsuit seeks fair price for gasoline in Florida and other warm-weather states;

    Suit Wants Oil Companies to Treat Consumers Fairly

    April 27, 2008

    Florida drivers pay among the nation’s highest gas prices because of
    high taxes and the state’s lack of refineries and pipelines.

    Now consumer advocates are taking legal action on another issue they
    say has Florida and other warmer states paying more to power their
    vehicles: hot fuel.

    When gasoline gets hot, it expands, taking up more space and providing
    less energy and fewer miles per gallon than fuel that is colder.

    With gas prices breaking record levels, and projected to rise more by
    summer, advocates are taking aim at a century-old federal standard that
    allows the oil industry to set prices based on the nation’s annual
    average temperature of 60
    degrees.

    Because of the regulation, motorists in warmer states such as Florida
    — with an average annual temperature of 82.4 degrees — get fewer
    miles per gallon for the gas they buy than those in cooler states.
    Floridians pay up to 9 cents more per gallon than motorists in the
    Northeast, Midwest and colder regions, according to consumer watchdog
    groups.

    Here’s why: A vehicle with a 20-gallon gas tank can travel about 490
    miles between fill-ups with 90-degree fuel in Florida, according to
    projections by the Owner-Operator Independent Drivers Association, a
    national trucker trade organization. But that same vehicle would travel
    495 miles if it were filled with gas at 75 degrees in Colorado and 505
    miles if it were filled at 45-degree temperatures in Buffalo.

    Hot fuel has prompted more than 35 class-action lawsuits nationwide,
    two congressional hearings and an inquiry by the General Accountability
    Office, Congress’ investigatory arm. Texas and California also are
    studying the issue.

    Advocates claim U.S. oil companies are overcharging consumers in warmer
    states and argue the current pricing structure should change.

    Industry leaders say they are following federal regulations.

    Jim Smith, president of Florida Petroleum Marketers and Convenience
    Store Association, said the lawsuits have no merit and disputed the
    scientific claims advocates have made. "There’s no scientific study
    backing up this issue," he said.

    Judy Dugan, founder and research director for Oilwatchdog.org, said
    there is strong scientific support for the advocates’ allegations and
    that motorists in warmer states are not getting a fair shake at the
    pump.

    "Florida is a money-making machine for gas stations and, ultimately,
    refiners because of hot fuel," said Dugan, whose consumer advocacy
    group is based in Santa Monica, Calif. "At Florida’s average gas
    temperature, motorists are losing four cents a gallon. In summer’s
    higher temperatures, it will often be double that."

    Dick Suiter, a retired National Institute of Standards and Technology
    expert who has examined the issue, said there is little debate among
    scientists.

    "It is commonly known that temperature affects the volume and quality
    of gasoline," said Suiter, an expert in this area who spent more than
    11 years at NIST, the federal agency in charge of advancing measurement
    science, standards and technology.

    He said new temperature-sensing "smart pumps" that calibrate fuel
    prices at the station could ensure fairness in the marketplace. He
    added that regulation requiring the technology might be needed if the
    industry doesn’t introduce it.

    In an effort to calculate the costs of hot fuel, the House Subcommittee
    on Domestic Policy tracked nationwide average temperatures during warm
    months, gasoline consumption for those months and gasoline prices in
    2006 and 2007.

    Hot fuel cost consumers $1.5 billion more in summer 2007 for gas than
    they would have spent if stations used "smart pumps," according to a
    report submitted by the subcommittee.

    In Florida alone, hot fuel cost motorists $260 million over a 12-month period in 2006 and 2007, according to the report.

    Plaintiffs in the class-action suits claim gas retailers generate extra
    profits by collecting fuel taxes on each retail gallon they sell, but
    remitting taxes to the government based on the number of wholesale
    gallons they sell, which are adjusted for temperature.

    All the class-action lawsuits — including those filed in Florida,
    California, Arizona and Texas — were combined recently and are waiting
    to be tried in front of a federal judicial panel in Kansas City, Mo.,
    said George Zelcs, an attorney for the plaintiffs.

    The attorney said the suit alleges gasoline sold in warmer states is an
    average of 10 degrees warmer than the industry standard. The suit aims
    to require gas stations to install "smart pumps," which are now used in
    Hawaii and Canada.

    Nathan Butler, an Oakland Park independent truck driver and a plaintiff
    in the first class-action suit, said he can’t afford to drive his
    18-wheeler through Florida this summer.

    "I don’t have a choice," said Butler. "If I buy fuel at high temperatures, I’d lose miles per gallon."

    U.S. Sen. Claire McCaskill, D-Mo., introduced legislation last year
    requiring gas stations to install "smart pumps," which cost between
    $4,400 and $7,300 per pump.

    "We have the technology to change that, and there’s no good reason not
    to utilize it," McCaskill said in a statement. "The least we can do in
    Congress is ensure consumers are getting what they pay for."

    Groups such as Public Citizen, Owner-Operator Independent Drivers
    Association, Consumers Union, Foundation for Taxpayer and Consumer
    Rights, Consumer Federation of America and U.S. Public Interest
    Research Groups have endorsed the proposed legislation.

    Major oil companies and independent operators have opposed changes in
    the law, arguing that retrofitting pumps to calculate fuel sales based
    on temperature won’t save consumers money. The South Florida
    Sun-Sentinel contacted the oil companies named in the class-action
    suit, but most declined to comment.

    "On the surface, this litigation claims to be a service to consumers,"
    said Margaret Chabris in a statement issued by 7-Eleven Inc. "But
    temperatures change throughout the day. Consumers don’t want prices to
    change with every rise or drop of temperature."

    John Siebert, an advocate for the Owner-Operator Independent Drivers
    Association, said many truck drivers are struggling to make a profit,
    and they are angry about the money they are losing on fuel.

    "You would assume that in a free market both sides would have perfect
    knowledge of the performance of a product before it is purchased,"
    Siebert said.

    Lesley Duke, of Hertford, N.C., an independent truck driver and
    plaintiff in the first lawsuit filed in 2006, said "People are not
    getting a fair shake. Billions of dollars are being taken away from the
    American public."

    Mc Nelly Torres can be reached at 954-356-4208 or mntorres@sun-sentinel.com

    Learn more:

    Public Citizen, www.citizen.org or 202-588-1000

    Owner-Operator Independent Drivers Association (OOIDA), www.turndownhotfuel.com or 800-444-5791

    To join the class-action lawsuit, contact attorney George Zelcs, of
    Korein Tillery in Chicago, at 312-641-9750 or gzelcs@koreintillery.com

    Gas-saving tips: www.Sun-Sentinel.com/helpteam

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