04-27-08 by dugan
A retail fuel industry publication sent out this story today, making every argument it could think of against Costco’s agreement to
sell gasoline that is adjusted for temperature so motorists get the
same energy from every gallon they buy. If Costco is only going to do this in a handful of states, for
at most a few dozen locations in any state, why is the rest of the
industry so scared?
The
most interesting argument in the story is that the industry, if it had
to follow what Costco is doing, would somehow recover every penny it might cost
(the amount would average just hundredths of a cent per gallon) to install pump equipment that adjusts for temperature, and to sell
slightly larger gallons in warm states (where Costco has agreed to
end the sale of hot fuel).
From Holly Alfano, the chief lobbyist fort he National Association of Truck Stop Operators:
"If ATC were installed on a fuel dispenser, based on the
temperature of the fuel, it would change the size of the gallon. So
based on temperature, they might get a little more or a little less
product. The California Energy Commission found that if the retailer
gives the consumer a larger gallon, the per-gallon price is going to go
up. You give someone more, they pay more. Retailers can put in ATC, but
at the end of the day, consumers will pay for any additional product
they get, because the retailer is just trying to stay in business. They
also found that consumers would pay for the cost of the equipment,
because you can’t stay in this business unless you are able to pass
your costs on. [The media and others are] ignoring these facts," said
Alfano.
First off, the California Energy Commission’s opinion came directly
from an "analysis" supplied to the commission by the National
Association of Truck Stop Operators and other fuel industry groups. The
Commission’s report was led by a commissioner whose wife is the chief lobbyist for the Western States Petroleum Association. So the fuel industry is laundering its hired opinions through the California Energy Commission.
Yet the interesting part is that if the industry would reclaim every
penny, why mount such a costly battle to keep from selling gasoline in
a transparent, fair way? Could it be because they wouldn’t really
recoup all the costs? Could it be because with temperature adjustment,
every gallon would have the same energy value, so drivers could make
accurate price comparison? (Currently, gasoline at stations across the
street from one another can vary by 15 degrees, so the hotter fuel is
actually worth 1% less. Drivers can’t accurately compare.)
Waht’s more likely is that the oil industry and refiners (which
already adjust their own transactions for fuel temperature) would have
to adjust their pricing to retailers. Currently, in warm states, the
suppliers overcharge retailers and assume they’ll make up the profit by
selling, for pure profit, gallons that they’ve essentially gotten for
free when the price to them is adjusted for temperature by the
supplier. The whole system would have to be more transparent, and the
industry fears transparency.
The most bogus argument is that what isn’t specifically allowed by
law must be illegal. Again, truck stop lobbyist Alfano cites from an
"analysis" prepared by an industry hired gun (ATC stands for automatic
temperature compensation at the gas pump):
"Under current law, ATC is not approved or allowed as a method of sale
for gasoline or diesel fuel. The National Conference on Weights and
Measures is only now considering whether to change the law to allow or
mandate ATC. Under the settlement agreement, unless NCWM or individual
states take action to change the law to allow ATC, Costco is not
obligated to install ATC."
First off, state regulators in California and dozens of other states
have determined that automatic temperature adjustment is legal, and
they are ready and able to regulate such sales. The states make these
decisions, not the National Conference on Weights and Measures, whose
job is to develop regulatory models for the states, not make the law.
It’s also an oranization that allows the oil industry lobbyists to be associate members and until recently, to fund the group’s activities–no wonder they’re having a catfight over
hot fuel. And the Costco settlement agreement does not say that anyone
has to change the law to allow temperatue compensation at the pump,
only that state regulators must certify the Costco pumps.
But the fundamental point is that f the industry’s argument were
true, it would be illegal to walk down the street eating ice cream,
because it isn’t specifically permitted by law.
The story’s most peculiar argument is that it’s all the messenger’s
fault, specifically the Kansas City Star’s, accusing it of "biased
reporting" and "ignoring the facts." That’s because a dogged Star
reporter called out the industry on hot fuel in 2006, when consumers
knew nothing about it, and has metioculously covered the story since
then. You can read the original, and undisputed, Kansas City Star series here.
And if Costco is only going to do this in a handful of states, for
at most a few dozen locations in any state, why is the rest of the
industry so scared?