Part Two: Oil Industry Resists  

AzCdKayle 61T
24 posts
8/29/2006 7:12 pm
Part Two: Oil Industry Resists

Well today's story that came by email was very interesting and also I did a search and found quite a few stories from different states and also that people are up in arms and complaining plus there is several investigations going on.

Here in Arizona, Arizonans overpay at the pump, state corrects price based on temperature only for orders over 5,000 gallons. So most drivers get less gas than they're paying for.

For 1 year of "HOT GAS" cost Arizonans $115 million!

Now on to Part II;

Oil industry resists adjusting gas pumps for hot climates

Steve Everly

Kansas City Star
Aug. 29, 2006 12:00 AM

OAHU, Hawaii - Idyllic weather, pounding surf and a warm, welcoming culture help make Hawaii a unique state. So does its gallon of gas.

The Hawaiian gallon contains nearly 234 cubic inches of fuel - about 3 cubic inches more than is dispensed in the rest of the United States.

The extra volume, required by state law, helps offset the higher temperature in this tropical climate, which causes the gasoline to expand. If the gallon weren't temperature-adjusted, Hawaiians would receive less energy per gallon than called for under the government standard. That's because for nearly a century, gasoline and diesel have been measured across America as if they were being dispensed at a temperature of 60 degrees, a more condensed gallon of 231 cubic inches.

The larger gallon saves Hawaiians millions of dollars a year. But in the rest of America, consumers will lose an estimated $2.3 billion this year because of "hot" fuel. No other state adjusts for temperature fluctuations when dispensing fuel, including warm-weather states such as California, Arizona, Texas and Florida, where drivers lose hundreds of millions of dollars a year.

In fact, few consumers even realize that they're not getting what they pay for when they fill up at the pump. That's because no national law requires retail station owners to sell fuel at the government standard of 60 degrees, or use pumps that adjust for hotter fuel.

That omission might seem odd, especially considering soaring gas prices and record oil industry profits. As Hawaii proved, states can take action to address the hot-fuel problem. Congress can step forward to require temperature compensation. And the industry could push for the change.

But don't count on it

The bigger Hawaiian gallon, which assumes a fuel temperature of 80 degrees, was introduced during the energy crisis of the 1970s. At the time, state officials considered it a temporary measure until the United States required fuel pumps that would automatically adjust the volume of gasoline and diesel to conform to the official standard.

Instead, the energy industry has repeatedly blocked efforts in America to install retail fuel dispensers that automatically adjust for temperature change. The American Petroleum Institute, which represents the industry, contends it would cost too much to fix the problem. Moreover, it says that consumers don't want to be bothered by pumps that adjust the size of a gallon to make sure they get the same amount of energy no matter what the temperature.

Ironically, the industry takes the opposite stance in Canada, where cold temperatures give it a financial incentive to adjust the volume of gas at the pump and make more money. Nearly all fuel sold at retail outlets in Canada is temperature-adjusted.

API has argued for decades that the hot-fuel problem isn't worth fixing because the "negligible" benefit to consumers doesn't justify the "undue burden" of the industry's cost to fix the problem.

"It doesn't make sense (financially)," says Prentiss Searles, a senior associate for marketing issues at API.

The industry acknowledges that it doesn't have a specific estimate on how much it would cost to retrofit or replace the nation's pumps to adjust for temperature change.

But Searles contends that it could cost $25,000 to purchase a new pump that adjusts for temperature. At that price, he estimates that the one-time cost of fixing the problem would be about $15 billion, equal to about six years of potential savings for American consumers.

But Searles' rough estimate is more than four times as high as what the API estimated in 1979, when it pegged the cost at $3.4 billion in today's inflation-adjusted dollars.

Moreover, pump industry experts point out that oil companies and other gas marketers regularly replace pumps for various reasons. Thanks to innovations in technology, adding an automatic temperature-adjustment control to a dispenser would be just a small part of the total cost.

For example, Lucy Sackett, marketing manager for Gilbarco Veeder Root Inc., a pump manufacturer in Greensboro, N.C., says adding an automatic temperature control to a dispenser would cost $1,105 to $1,975 per pump.

But a new pump isn't even necessary to deliver temperature-compensated fuel.

Officials with Kraus Global Products in Canada say the company's retrofit kits sell for $630 to $1,100 for an electronic dispenser. For mechanical dispensers, used primarily at some small stations, retailers would need electronics that would allow the automatic adjustment for temperature. Yet it would still cost $1,350 and $2,700 each to retrofit those pumps, Kraus Global says.

Based on such figures provided by pump manufacturers, the retrofit cost would roughly average $2,000 to $2,650 per dispenser, including labor. At that cost, the one-time price to fix the nation's hot-fuel problem would be $1.4 billion to $1.9 billion. And that expense would likely be spread out over several years.

API's argument that it would cost too much to fix the hot-fuel problem is echoed by the Petroleum Marketers Association of America, which represents independent gas station operators.

"You put significant cost on the industry for virtually no gain," says Dan Gilligan, president of the marketers association.

Indeed, the industry's view of the cost may also include the $2.3 billion in revenues oil companies and gas marketers take in annually from consumers because of hot fuel. Yet no matter what the true cost may be, one thing is certain: With high gas prices and record oil company profits, there is plenty of money available to fix the problem.

Five of the largest oil companies - BP PLC, Chevron Corp., ConocoPhillips, Exxon Mobil Corp. and Royal Dutch Shell PLC - recently reported combined second-quarter earnings of $34.6 billion. By way of perspective, a high-end estimate of $1.9 billion to fix the hot-fuel problem is the equivalent of just five days of those companies' second-quarter profits.

So, what would it take to make the temperature-adjustment change in the United States?

Weights-and-measures regulations have mainly been the responsibility of the states since the country was founded. The National Institute of Standards and Technology, a federal agency, offers technical assistance to the states but doesn't have any enforcement powers. So states look to the National Conference of Weights and Measures, attended largely by state regulators and industry officials, to agree on model codes for states to adopt.

The conference's annual meeting in July adjourned with little optimism that anything would happen soon. The reason is simple: The conference strives for consensus, and the industry doesn't want adjustable fuel pumps.

Congress can also step in to require temperature adjustment. The Fair Packaging and Labeling Act of 1966, for instance, imposed uniform rules on how the weight or measurement of packaged products is displayed so that consumers could more easily make an informed choice.

Constitutional law experts say a similar move by Congress to impose temperature compensation on retail fuel sales would probably be within its authority.

Such a move, however, would face a difficult path politically. Even with gas prices at record levels and major oil companies posting record profits, Congress has been reluctant to take on the industry.

Well there you have it. Another way the BIG OIL Companies screw the consumers!


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