Oil Watchdog

KANSAS CITY, MO — The head of the Federal Trade Commission is facing questions about her use of incorrect information underplaying the effect of hot fuel on consumers.

Deborah Platt Majoras, the FTC’s chairwoman, writing to a
congressman from California, questioned whether the effect of hot fuel
on individual consumers was significant enough for the FTC to consider
the practice deceptive.

The effect, she said, was "very small."

But that conclusion was based on information in the letter that
a 20-degree difference in temperature would result in the volume of a
20-gallon fill-up fluctuating by just 6 tablespoons.

In fact, that measurement underplayed the effect by more than
90 percent, according to figures from the National Institute of
Standards and Technology. The actual effect of that much temperature
fluctuation is more than a quart for a 20-gallon tank.

The House Domestic Policy Subcommittee, in a letter sent Friday
to the FTC, said the magnitude of the error raised serious questions
about the opinions expressed in the Majoras letter. The subcommittee’s
letter concluded by echoing Majoras’s suggestion in her letter that
Congress gather more facts about hot fuel before considering reform
proposals.

"It would have been wise for the FTC to heed its own advice," wrote Rep. Dennis Kucinich, the subcommittee’s chairman.

A spokesman for the FTC said the agency, which regulates many
issues affecting the oil industry, was reviewing the data in the letter
sent by Majoras and would not comment until that review was completed.

Majoras’ misstatement goes to the 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 cost consumers an estimated $2.3 billion
annually.

The appointment of Majoras as FTC chairman in 2004 raised
concerns at the time because of her previous work as a private attorney
for Chevron Corp. The FTC typically is the agency that investigates
allegations of manipulation of gas prices.

The federal agency, however, routinely 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 summer 2006.

The FTC’s hot fuel letter was seen by some as the latest
evidence that the agency routinely sides with industry, this time
without even a formal study.

"A letter like this seals the reputation of the FTC as the
defense department for Big Oil," said Judy Dugan, research director for
The Foundation for Taxpayer & Consumer Rights.

Rep. Darrell Issa, a California Republican, on July 13 wrote
Majoras soliciting the views of the FTC or its staff on the
desirability of legislation to fix hot fuel. Issa, an opponent of a
fix, said he or his staff could provide additional information if it
would be of use to the FTC. It was unclear whether additional
information was provided.

Majoras responded in a letter dated Aug. 28, although it was
not released by Issa until Thursday. In a news release, Issa said that
while Democrats were saying hot fuel was a massive fraud, the FTC had
concluded that a fill-up with 80-degree fuel would affect the volume by
only 6 tablespoons of fuel.

"While pursuing hot fuels, Democrats have fudged numbers," Issa said in a prepared statement.

A spokesman for Issa said Friday that he would wait for a third
party to judge the accuracy of the information in the FTC letter.

Much of the Majoras letter hinged on its example of the
20-gallon fill-up and its effect of only 6 tablespoons. The effect
would have to be substantial for the FTC to intervene, according to the
letter, and fixing the problem might not be justified if the benefit
was found to be so small.

The reference to 6 tablespoons came from discussions between
FTC staff and state weights-and-measures officials, according to the
letter.

The chairman of the National Conference on Weights and
Measures, a group that represents state weights and measures
departments, could not be reached Friday.

A few state officials said they had not provided the information and had been trying unsuccessfully to find out who did.

The subcommittee, which found out about the letter on Thursday,
made an inquiry about its accuracy to the National Institute of
Standards and Technology. The response, on the same day, was that the
effect, instead of 6 tablespoons, was 0.276 gallons — or a little more
than a quart.

Kucinich said the FTC letter would be part of the subcommittee’s ongoing investigation of hot fuel.

"I hereby request a briefing from you at your earliest
opportunity to discuss the basis for the opinions you have expressed in
your letter," he said in his letter to Majoras.