4-20-09 by dugan
Great news–the legal paper Daily Journal (subscription barrier) said Friday that the Costco chain, already know for consumer-friendliness, agreed to eliminate the "hot fuel" ripoff at its gasoline stations. Unlike every other gasoline retailer in the U.S., Costco would install new pumps that put a little more gas in every gallon when the fuel temp is above 60 degrees (a savings of at least a few cents a gallon, and a nickel to a dime a gallon in summer, in California and other warm states). It turns out that the story was a tad premature–there are still details being worked out between Costco and lawyers leading a suit against hot fuel. But we think it will happen, just as Oil Watchdog urged Costco to do early last year.
The not-quite-deal is part of a legal settlement, and would remove Costco from national and state class action lawsuits by drivers–and by truckers, who can lose hundreds of dollars worth of fuel each year when they buy diesel that can reach over 90 degrees. But there were rumors back to late 2007 that Costco was talking with state regulators about being fair to drivers. The company backed down, clearly under industry pressure. Hooray to Costco for continuing to pursue the idea. OilWatchdog will cheer out loud, and keep consumers posted, as soon as the new pumps go in.
Fairness is the point. When the temperature of gasoline rises above 60 degrees, gasoline expands but gas pumps don’t account for the bigger volume, so consumers receive less gasoline than they should. When you buy gasoline, you have no idea what the fuel temperature is, and retailers don’t want you to know. For every 15-degree rise, 1% of the fuel is lost to expansion. Some big gas stations and truck stops keep their fuel aboveground, in tanks painted flat black. They don’t paint them black for convenience–it’s a perverted use of solar energy to keep the fuel hot. A 2% expansion of gasoline over 60 degrees, at even $3.00 a gallon, is a $1.20 loss on a 20-gallon fillup. At $4 a gallon, the loss is $1.60.
For more stories, pix and video on hot fuel, click here. And here’s the gist of the Daily Journal story:
LOS ANGELES – In the wake of multiple federal lawsuits, Costco, the world’s largest warehouse membership chain, has agreed to curb its practice of charging more for gas that has expanded in warm weather, according to a settlement reached last week.
The giant retailer agreed as part of the settlement to install an apparatus on its fuel pumps that adjusts for so-called "hot gas" and ensures that customers are not getting less gas than they paid for. The problem is more common in certain warm-weather states like California.
Costco is just one of 173 gas retailers – including Hess Corp., Chevron USA Inc. and Exxon Mobil Corp. – targeted in more than 20 proposed class actions nationwide.
Costco officials did not return calls for comment. The company’s attorney, David F. McDowell of Morrison & Foerster, could not be reached on Friday.
In complaints, plaintiffs’ lawyers allege that because gas is priced at a 60-degree standard and gas expands in temperatures above 60 degrees, customers are essentially paying the same price for extra air in hotter climates. The complaints allege retailers routinely overcharge their customers between three and nine cents per gallon.
All those pennies add up quickly, critics say. The House Subcommittee on Domestic Policy estimating that "hot gas" costs drivers nationwide more than $1.5 billion during the summer months.
Put another way, Girardi claims that a car that normally gets 30 miles to the gallon could get only 26 miles on a hot day.
Both plaintiffs’ attorneys and consumer groups say the discrepancy could be rectified with an automatic-temperature compensation device that can adjust pumps for temperature changes.
Retailers have stayed mostly mum on the issue, saying only that the suggested fix would be too costly to implement.
Costco, which usually undercuts the competition on gasoline prices anyway, does big volume at its discount warehouses, and obviously thinks the cost–actually just hundredths of a penny per gallon over the life of a pump, according to the California Energy Commission–is worth it.
We don’t know why this story jumped the gun, but we sure hope the details still being discussed get resolved quickly, to let Costco move ahead with "Fair Fuel".