08-01-07 by dugan
With temperatures across the Southwest routinely over 100 degrees in recent weeks, the summer’s "hot fuel" ripoff is peaking. Against that backdrop, oil executives were hauled before Congress last week and proceeded to hang themselves with their own words, insisting that:
1. "Hot fuel," which costs drivers a loss of up to several cents per gallon worth of energy per gallon at the pump, doesn’t harm consumers;
2. Selling gasoline honestly by compensating for temperature changes is against the law in the U.S.;
3. Wholesalers deserve to buy their gasoline at a price that is compensated for temperature, but drivers don’t.
As quoted Monday in a Kansas City Star editorial and in his prepared testimony, Shell OIl Vice President Hugh Cooley told the hearing that “Shell does not believe that the American consumers are harmed in any way by not having temperature adjustment at retail dispensers.” (A federal study has calculated the annual loss to U.S. drivers at $2.3 billion.)
Ben Soraci, Exxon Mobil’s director of U.S. retail sales, asserted that state laws and regulations make it “unlawful to sell gasoline on a temperature-compensated basis.” (Rep. Dennis Kucinich, chair of the House Domestic Policy subcommittee, pointed out that only nine states have laws that would bar temperature compensation.)
Cooley stated that wholesale transactions had to be temperature-adjusted because "Gasoline marketers like Shell exchange large volumes of gasoline between terminals that are very far apart, often in markedly different climates, and at varying times of the year, all of which requires accounting for the impact of temperature variations." (Drivers traveling to different climates and buying gasoline at different seasons of the year somehow don’t deserve the same fairness. )
Both men argued that paying for temperature-adjusting equipment would drive independent branded gasoline retailers out of business, before admitting that "development funds" for improvements at branded stations could help pay for it.
Both said any benefit would be canceled out because retailers would raise prices to make up for any loss from temperature compensation, which directly contradicts the "forced out of business" argument. In truth, prices would go up only if refiners made it so by refusing to adjust their own pricing to make the whole supply chain honest.
As for the oil guys’ insistence that the the National Conference on Weights and Measures has "rejected" temperature compensation, here’s the real story.
At the longtime industry standard of 60 degrees, the 231-cubic-inch U.S. gallon puts out a certain amount of energy. But fuel is often sold at much higher temperatures, causing the fuel to expand and the amount of energy to decline for each gallon dispensed.
Most wholesale transactions and many end-sale bulk transactions are adjusted for temperature variation–the U.S. military, for instance, demands it. Most everyone except the individual driver gets an honest gallon’s worth of energy for the price. Ethanol additives also cut total energy, but like gasoline ethanol expands in heat, and delivers even less relative energy.
Both oil execs called for lots more studies as their preferred solution. Both acknowledged that their companies had never studied the costs and benefits of temperature compensation for U.S. drivers, and apparently had no intention to do so.
This was Kucinich’s second hearing on "hot fuel," and the execs’ answers caused some eye-rolling in the committee. Except, of course, for Big Oil’s friends on the committee. California Rep. Darrell Issa called the whole issue "frivolous."
Issa’s constituents, especially in hot inland areas of San Diego and Riverside Counties, should let Issa know at his field office, (760) 599-5000, if they think losing a nickel or more on each gallon year-round is frivolous. Californians’ average loss per year to hot fuel is estimated at $450 million to half a billion dollars.
Rep. Brian Bilbray, also of California, tried to change the topic by saying that ethanol rips off drivers, and California should quit using it. (So much for cleaner air.) He, of course, did not mention that ethanol is the nation’s clean-air additive because Congress ordered it.
Compensation for hot fuel is physically simple, uses proven technology and, unlike global warming, easily fixable. Thanks to Rep. Kucinich for staying on the case.