Consumer Groups Criticize Oil Industry Resistance to Fixing Hidden Charge at Pump That Costs U.S. Drivers Close to $3 Billion Yearly
Washington, D.C. -- As Memorial Day kicks off the summer driving season and gas prices scrape and sometimes exceed $4 per gallon, U.S. auto and truck drivers are paying $3 billion a year in hidden charges at the pump for fuel that expands and loses value as it heats up. (For information on audio news conference at 11:30 a.m. see note at end of release.)
"A 'hot fuel' surcharge of up to a dime a gallon is concealed from motorists because they have no way to tell if the fuel they're buying is 60 degrees, 90 degrees or more," said Judy Dugan, research director of the nonprofit, nonpartisan Consumer Watchdog. "Fuel at gas stations across the street from one another can vary by 10 or 15 degrees, so drivers have no way to judge the actual value of what they're buying, no matter what the posted price."
The nation's leading advocate for independent truckers, the Owner Operator Independent Drivers Association (OOIDA), is also protesting the failure of national regulators to fix this rip-off in the face of oil industry lobbying. A number of individual truckers are pursuing a national lawsuit against the deceptive practice.
"The hot fuel scam costs our members at least hundreds of dollars per year," said John Siebert of OOIDA. "Fuel prices are adjusted for temperature at every point in the sales chain except the final one to consumers. It's high time to end this hidden oil industry subsidy."
Gasoline is sold by volume, and it expands as the temperature rises, a bit more than 1% for every 15 degree Fahrenheit increase in temperature. A century-old oil industry standard fixes the assumed temperature at point of sale at 60 degrees. Yet the average year-round temperature of gasoline sold in the U.S. today is near 65 degrees. Summertime temperatures are often drastically higher, especially in warm states. At 90 degrees, a 20-gallon fill-up costs a driver $1.60 more than it should, because the expanded "hot fuel" loses energy.
A comprehensive investigation by the Kansas City Star published in August 2006 estimated that U.S. consumers are shorted about 760 million gallons of gas and diesel per year by hot fuel sales. At the current average national price of $3.81/gallon, (for today's prices see www.fuelgaugereport.com), that's $2.88 billion per year. As U.S. prices increasingly cross the $4 barrier, the hot fuel tab will exceed $3 billion.
At current prices, in hot months in Western and Southern states, car drivers pay an extra 7 cents to 9 cents per gallon. Even in the unlikely event that the 18.4 cent a gallon federal gas tax was suspended for the summer, drivers would be paying half their savings back to oil companies for hot fuel that has been robbed of its full energy value.
"Adjusting fuel price to temperature is a matter of simple fairness," said Joan Claybrook, President of Public Citizen. "Sending customers away with less than they paid for is unacceptable in any industry."
Simple, moderately priced technology that adjusts the price at the pump to account for temperature has existed for decades. In Canada, where average gasoline temperatures are lower than 60 degrees, the oil industry lobbied for, and obtained, the right to adjust price to temperature so consumers wouldn't benefit from "cold gas." In the U.S., however, the industry has lobbied successfully against state legislation or national regulations mandating temperature-adjusted pricing.
"The oil industry has taken a classic "heads-we-win-tails-you-lose" position when it comes to temperature-based differences in fuel value," said Judy Dugan, research director of the nonprofit, nonpartisan Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights). "In the U.S., oil companies and gasoline marketers argue that retail temperature-adjusted pricing is unnecessary, even though the dealers buy wholesale gasoline with a temperature adjustment. In Canada, they have been more than willing to install retail temperature adjustment, prompted only by their own profit calculations."
In February, a Federal District Judge in Kansas City denied a motion to dismiss the national "hot fuel" lawsuit. Sen. Claire McCaskill of Missouri is sponsoring legislation that would require retail temperature adjustment over a period of several years.
Independent truckers are hit hardest by the hot fuel premium (large trucking companies buy their own fuel in bulk and demand that it be temperature adjusted). The Owner Operator Independent Drivers Association, based in Missouri, supports the hot fuel lawsuit.
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For more information about hot fuel, please visit www.oilwatchdog.org.