Oil Companies Are Using a Simple Trick to Bilk Consumers out of Billions

[babylonsister]

Rep. Kucinich at the front of this investigation, too.


http://www.alternet.org/story/59593/?page=2

Oil Companies Are Using a Simple Trick to Bilk Consumers out of Billions

By Brian Beutler, Media Consortium. Posted August 14, 2007.

snip//


Oil companies know that gasoline expands at higher temperatures and has less volume at lower ones, but they've refused to upgrade gas stations with a simple tool that would adjust the price of gas according to its temperature.


Kucinich's hearings were designed to shed light on this and other double standards. Oil company executives, testifying under threat of subpoena, told the subcommittee that gas retailers in the United States don't use heat meters -- known as "automatic temperature compensation" -- because state regs don't let them. "State weights and measures regulations have not adopted temperature correction," said Hugh Cooley, a Shell Oil Company vice president, in answer to Kucinich's inquiries. Ben Soraci, Director of General Sales for ExxonMobil, echoed Cooley, insisting that "across the U.S. a gallon is still defined as 231 cubic inches by law."

But Kucinich offered evidence to the contrary. His subcommittee asked the National Institutes of Standards and Technology to survey all 50 states and the District of Columbia about their weights and measures rules. "Most states permit the use of temperature compensation at both the wholesale and retail level," Kucinich said the survey found. "In fact, NIST could find that automatic temperature compensation is only expressly prohibited in nine states for retail."

Further, Kucinich found that Gilbarco Veeder-Root sought certification for its automatic temperature compensation equipment in California. Gilbarco was responding to what it has said was the stated interest of California gas retailers, but it found no buyers when the state gave its product the OK.

Cooley and Soraci say that's unsurprising because the cost for implementing devices like Gilbarco's, an investment estimated to be about $2,500 per unit, would be borne by retailers -- the majority of which are affiliated only loosely with big oil companies -- and then ultimately passed on to the consumer. The oil execs' contention is true as far as it goes, but belies the fact that oil companies maintain funds -- called "image" and "development" funds -- meant to help so-called arms-length retailers pay for modifications and improvements to their gas stations. The money is there to extend to consumers the same fair deal wholesalers get, but the companies don't particularly want to spend it.

Kucinich's subcommittee is now also investigating whether that's the reason California retailers balked when given the chance to use Gilbarco Veeder-Root's system, and whether states should be encouraged to mandate pricing by amount of energy bought rather than volume of gas sold.

[Turbineguy]

1. You buy gasoline by volume

not by weight or energy content, both of which vary with temperature as well as formulation.

The entire system is based on volume. Volume limits storage and transportation.

Gasoline volume is corrected to 60 degress F, at the wholesale level but not at retail. That means you get more for your money in the winter and less in the summer. The amount varies by about 1 percent per 14 degrees F above or below 60 degrees. Obviously, in areas that are always above 60 degrees delivery temperature, this is an issue.

But at the end of the day your actual cost is determined by the energy content which will control your gas mileage. Also, the gasoline is stored underground where the temperature is lower than ambient. Once it gets in your car's tank however, it can warm up and evaporate. I would think that the amount lost to evaporation due to expansion is far more significant than the difference due to lack of temperature compensation at the pump.

[peacetalksforall]

2. DU is great. The range of experts is amazing and I am thankful

for the education I receive - whether legal, government, energy, business, plus the kind of science and medicine that we are gifted with each day. I would have missed much. Thanks.

[babylonsister]

3. You obviously know more about this than I do; can you comment on this

device mentioned in the story? Is Kucinich making much ado about nothing? And why would Canada think it so important?

The North Carolina-based company Gilbarco Veeder-Root manufactures a device -- a temperature-sensitive chamber for fuel -- that, if affixed to gasoline pumps across the country, would return that money to consumers and help relieve some of our storied gas-price pressures. The device -- and others like it -- is simple, functional and, in fact, already in widespread use at gas stations all across Canada. Last month, Democratic presidential hopeful and Ohio Rep. Dennis Kucinich, chair of the Domestic Policy Subcommittee, held the second in a series of hearings to investigate why the technology has never made it into the American market.

[Turbineguy]

4. There is no mystery to the device.

it's mostly a case of using it. It's a policy issue in my view. And it's an issue of millions of small transactions making a large number. So it's a question of spending $2500 per gas pump to change the metering. One of the reasons a lot of independent gas stations went under is the cost of compliance with new EPA standards. For most gas stations this device would be a zero sum improvement because of the seasonal difference. However, in colder climates (such as Canada and the Northern US States) the retailer would benefit by the installation of temperature compensators as they would increase the metered amounts.

On the other side it's an added complication.

BTW. My expertise is not in gas station operation but on ships where we bought fuel thousands of tons at a time. This was residual, high viscosity fuel oil. Fuel of this type is sold by weight. The ships storage tank tables are volume based. The numbers had to be corrected for specific gravity as well as temperature. Delivery temperatures had to be at least 110 degrees F but sometimes were as high as 150 degrees. Delivery temperatures made large differences in costs amounting to tens of thousands. Arguments with suppliers sometimes took more time than the actual fueling. A friend was once offered a $5,000 bribe to sign a receipt (he did not accept). In reality it was easy to fudge the books so that over time the vessel owners would never find out they were cheated.

Specific gravity numbers (as well as other properties) were tested and confirmed by independent labs. The delivery temperature was the best way for the supplier to cheat. Some people used to add water but then a paste was developed that would reveal water when the tank was measured. Also ships got test kits for making rudimentary analysis.

I think it's unlikely that automobile gas stations would actually warm up the gasoline in order to pick up a few cents.