Getting burned at the gas pump

As temperatures rise in underground storage tanks, gasoline loses energy, but fuel prices don't flex to compensate consumers.

August 22, 2007|Ralph Vartabedian | Times Staff Writer

It was another toasty day on June 19, when representatives for the California Division of Measurement Standards showed up at a gas station in Riverside to check the temperature of the gasoline in the tanks.

What they discovered lent evidence to the allegation that consumers are being shortchanged by gasoline retailers and the oil industry.

The temperature in the underground tanks at the station was 94.4 degrees at 1 p.m. that afternoon, hotter than the roughly 90-degree air temperature, according to the agency's official log.

The measurements were part of a statewide survey that is coming amid allegations that an annual $2-billion rip-off is occurring nationwide because of hot gas.

As students of high school chemistry know, some liquids, particularly gasoline, expand when they get hot. But a gallon of expanded hot gas contains less energy, even though gas stations charge the same amount.

The energy content of a gallon of gasoline is based on fuel at 60 degrees. At the wholesale level, all transactions of gasoline are adjusted for the volume of gasoline or diesel when the fuel is at 60 degrees.

Each 15 degrees above the 60-degree standard increases the volume of the fuel by 1%. So each gallon of that 94.4-degree gasoline in Riverside contained 2% less energy.

You might say that amounts to a few cents per gallon. But the cents add up. The Owner-Operator Independent Drivers Assn., an organization representing truck drivers, estimates that the oil industry pockets about $2.3 billion annually from such overcharges. Long-haul truckers, who drive more than 100,000 miles per year, can get dinged by more than $700 annually, the group says.

"Southern California is the epicenter for this problem," John Siebert said. It has high temperatures, lots of cars and obviously a layout that requires absurd amounts of driving.

The association's estimates and other similar estimates are based on gasoline temperature data compiled by the National Institute of Standards and Technology, using environmental monitors on underground tanks at 1,000 stations across the nation. The data showed that gasoline in many middle-tier and Southern states is consistently above 60 degrees. In some cases, temperatures have popped over 100 degrees, said Siebert.

A federal lawsuit filed in November 2006 charged the oil industry with systematically cheating consumers and over-collecting federal excise taxes. George Zelcs, the Chicago attorney representing plaintiffs, said the suit is seeking a refund for consumers, possibly for charges that date back five or six years. That would put damages at more than $10 billion. It also wants the industry to agree to put temperature-compensating registers on all pumps.

But the gasoline industry is resisting any quick change. At a congressional hearing in late July, Ben Soraci, director of U.S. retail sales for energy giant ExxonMobil, said in some states his company cannot legally change the way it measures gasoline at retail pumps and that the whole issue needs a lot more study.

"ExxonMobil supports a comprehensive study to evaluate whether to change the current retail measurement standard," he said.

Separately, gasoline retailers say that volume increases associated with higher temperatures raise the supply, leading to lower prices. And they claim the cost of those temperature-compensating instruments would cost from $2 billion to $10 billion across the nation.

The oil industry gets a lot of abuse, much of it without merit. But it's on the wrong side of the argument in this case.

I seriously doubt any gasoline consumer in California could recognize that gasoline gets cheaper when fuel gets hotter. On the contrary, the summer driving season usually brings the highest prices of the year. Neither the consumers nor the gas stations know the temperature of the gas at any given moment. So, the oil industry must be thinking some kind of invisible market force is at work, a notion that is impossible to prove.

Arguing that it is too expensive to install equipment that fairly measures gasoline also seems feeble. Even at $2 billion, the new equipment would pay for itself in consumer savings in less than one year. But when you're pocketing that $2 billion, why would you pay $2 billion to give it up?

Zelcs said the industry's arguments fall apart when you look at what happened in Canada in recent years. In general, Canadian gasoline is below 60 degrees, meaning consumers there were getting a break. The oil industry sponsored legislation that required temperature compensating equipment to protect itself from dispensing free gasoline.

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