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Costco Gas Prices Will Be Adjusted For Heat Expansion

Costco Wholesale Inc. has agreed to install new gasoline pumps at
stores in California and 13 other states that will adjust prices when
fuel temperatures rise above the industry standard of 60 degrees.

The agreement would end Costco's involvement in a lawsuit filed by
consumers against oil companies and fuel retailers contending that they
have knowingly overcharged consumers by selling fuel that contains less
energy because it expands as it gets warmer. The retailers adjust for
warm temperatures when they buy at the wholesale level but not when
they sell to consumers. Some estimates place the cost to consumers at
$2 billion or more a year.

Under the agreement, Issaquah, Wash.-based Costco will install
price-adjusting pumps in seven other states and the District of
Columbia if it begins buying temperature-adjusted fuel wholesale in
those areas.

The proposed agreement, which was signed Wednesday, will be
implemented over five years if approved by a federal judge in Kansas,
where several lawsuits were consolidated.

The other states where Costco will sell temperature-corrected fuel are
Alabama, Arizona, California, Florida, Georgia, Kentucky, Nevada, New
Mexico, North Carolina, South Caroline, Tennessee, Texas, Utah and
Virginia. If any state forbids the installation of such pumps, Costco
would be exempt there.

"This is fantastic news for consumers," said Judy Dugan, research
director of Consumer Watchdog, a Santa Monica-based advocacy group.
"Costco is taking the lead in offering drivers gasoline that has the
same amount of energy in every gallon, living up to its reputation as a
consumer-friendly place to shop."

Currently, only Hawaii requires service stations to install automatic
temperature compensation devices on pumps. In Canada, retailers
voluntarily use the equipment to make sure they don't provide extra
energy to customers when the fuel contracts in the 90% of the country
that has long and frigid winters.