Oil Watchdog

KANSAS CITY, MO — When it comes to hot fuel, the head of the
Federal Trade Commission has a couple of well-chosen words for
Congress: "I… apologize."

Deborah Platt Majoras, the FTC’s chairwoman and a former
private attorney for Chevron Corp., has admitted that a recent letter
questioning of the consumer benefit of fixing hot fuel used inaccurate
information about the effect of temperature fluctuation on gasoline.

"I highly regret the error," she wrote in a letter sent Tuesday
to Rep. Dennis Kucinich, chairman of the House Domestic Policy
Committee.

The apology came just days after a letter sent by Majoras to Rep. Darrell Issa of California was released to the public.

In the letter, Majoras said the FTC had not done a formal study
on the effects of temperature on fuel, but added that the benefit to
consumers if retail pumps were equipped to adjust for hot fuel could be
so small that the FTC might not even consider its sale to be a
deceptive practice.

To make the point, Majoras used an example of dispensing
80-degree fuel for a 20-gallon fill-up, which she concluded would
amount to a change in its volume of only 6 tablespoons. She went on to
urge Congress to collect more facts on the issue before requiring that
retail pumps be equipped to account for fuel temperatures, which she
added could end up raising fuel prices.

But the true effect that temperature has on gasoline volume was
understated by more than 90 percent in the Majoras letter. Indeed, the
National Institute of Standards and Technology confirmed that the real
difference in the example used by Majoras was more than a quart.

Kucinich quickly pointed out the "significant error" to
Majoras, adding that using the incorrect number called into question
her opinion on whether hot fuel should be fixed.

Majoras, in her reply to Kucinich, said that after the
congressman had pointed out the error, her staff made further inquiries
"and confirmed that data we relied on was wrong."

"I write to apologize for providing some inaccurate information in my Aug. 28, 2007 letter to Congressman Issa," Majoras wrote.

"I highly regret the error," Majoras said, adding that she was
directing her staff to conduct a thorough reassessment of the issue
"based on accurate data."

It remains unclear whether that reassessment using accurate data will sway Majoras’ opinion on the issue.

A spokeswoman for Kucinich said he had no comment and would let the Majoras letter "speak for itself."

The numbers in question go to the very heart of the hot fuel issue.

Fuel expands and contracts depending on temperature. 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.

Fuel temperatures during the summer can exceed 100 degrees in many states.

At other stages in the fuel-delivery chain, the industry
routinely adjusts volume for temperature change using the 60-degree
industry standard. But retail pumps in America make no adjustment for
changes in the volume caused by temperature, so consumers get only 231
cubic inches per gallon, regardless of temperature.

In a series of stories beginning last year, The Kansas City
Star estimated that hot fuel costs consumers an estimated $2.3 billion
annually.

The oil industry has questioned whether there would be benefits
for consumers from addressing hot fuel, arguing it would cost too much
to fix. Even so, the industry has embraced temperature adjustment of
retail fuel sales in Canada, where "cold fuel" would otherwise pinch
profits.

Issa, who opposes hot fuel reform, on July 13 wrote Majoras
soliciting the views of the FTC or its staff on the desirability of
federal legislation to require that fuel pumps make an adjustment for
temperature. Last week, Issa cited the FTC’s response. In a prepared
statement, Issa argued that the FTC
letter showed that Democrats had "fudged numbers" when it came to
discussing hot fuel.

The FTC is the main federal agency to investigate deceptive
business practices, but it is increasingly viewed by consumer groups as
pro-business. The appointment of Majoras as FTC chairman in 2004
heightened those concerns because of her previous work as a private
attorney for Chevron.

The FTC typically is the agency that investigates allegations
of manipulation of gas prices. But it regularly dismisses such
allegations as unfounded. It has opposed a federal gas-price gouging
law, and last month released a study that it had found no evidence of
manipulation causing gas price spikes during the summer of 2006.

That the FTC fumbled an essential fact in the hot fuel debate
was initially met with disbelief by many who have closely followed the
issue. That disbelief has since segued into humor. A weights and
measures official attending a regional meeting this week referred to
the FTC’s views as an example of "tablespoon science."

Although the FTC has promised to take another look at the hot
fuel issue, some consumer groups would prefer that it now recuse
itself.

Judy Dugan, research director for The Foundation for Taxpayer
& Consumer Rights, said the initial letter sent by FTC was so
blatantly political that the federal agency has lost its credibility,
especially since it made such a serious error about hot fuel’s impact.

"This should remove the FTC from any authority to comment on the hot-fuel issue," Dugan said.