Are we being chiseled further at the gas pump?

It took a disastrous financial crisis to shove the gas price issue to the back burner (and force prices down for that matter). But a new government report promises to reheat the long simmering debate over the effect of temperature on fuel volume and consequently the amount and cost of energy per gallon.

At the heart of the debate, and a class-action federal lawsuit, is the allegation that major oil companies are squeezing motorists out of about $2 billion a year by selling overly warm gas that delivers less energy than it should. The simple solution proponents say is forcing oil companies such as ExxonMobile, Chevron, ConocoPhillips, BP America, Supervalu and Shell and their gas stations to implement technology that would compensate for the temperature differences between shipped and stored gas and the stuff in your tank.

In a nutshell, the volume of gasoline expands or contracts by 1% for each 15 degree increase or decrease in temperature, while the energy content of gasoline remains the same, according to the Government Accountability Office which issued the report this week. For example, 10 gallons of gasoline at 60 degrees Fahrenheit (F) expands to 10.2 gallons of gasoline at 90 degrees F but maintains the same total energy content. As a result, the average energy content per gallon of the 90 degree fuel will be less than that of the 60 degree fuel. In the US, wholesale fuel transactions are routinely adjusted for temperature-related changes in volume. However, at the retail level, gasoline and diesel are sold by volume-specifically, 231 cubic inches per gallon-without regard to temperature, leading some to believe that the retail price of a gallon of fuel may not reflect its true value, the GAO said.

The GAO said while the debate over what's known as "Hot Fuel" is palpable, a short term agreement amongst combatants is unlikely. "The weights and measures community has debated the costs and benefits of automatic temperature compensation for more than three decades with no resolution. The issues have not changed substantively, and both sides continue to passionately put forth their views. In general, supporters say that extending temperature compensation to the retail level could provide more transparency in fuel prices, while those who are opposed argue that upgrading existing equipment would be costly and pose potential economic hardship on retailers," the GAO said.

After this summer's gas price rise, it's unlikely the public would deal with additional price increases. While the GAO says it remains unclear "what it would actually cost to implement automatic temperature compensation and whether consumers or businesses would end up paying those costs," we all know that consumers always end up on the short end of the stick.

The GAO report states the costs to implement automatic temperature compensation are unclear.

"Most stakeholders said that implementing automatic temperature compensation for retail sales would involve the cost to purchase, install, and inspect new equipment on pumps, as well as costs to educate consumers about the change. Some stakeholders said the costs to adopt automatic temperature compensation ranged from $1,300 to $3,000 per pump, but none had estimated the total costs nationwide. Estimates of the cost to inspect the new equipment varied. Officials in a small number of states said inspection times would increase by 20 to 50%, while officials in three other states said the costs would not be significant, the GAO said.

The GAO went on to say that changes in gasoline temperature can occur for several reasons from the time these products leave the refinery until they are deposited into a vehicle. For example, retail fueling stations located near a refinery or a pipeline may receive fuel that is still hot from the refining process, and the heated fuel will affect the temperature of the fuel already in the storage tank. In addition, the use of underground storage tanks-particularly those with double walls-may lengthen the time required for the fuel to cool to ground temperature of about 55 degrees F, the GAO said.

A common misconception is that the use of underground storage tanks helps ensure that fuel remains at or below 60 degrees F. According to a 2004 NIST study based on 2 years of data, the average temperature nationwide for fuel stored underground was about 64 degrees and varied among states from about 82 degrees in Florida to 53 degrees in Minnesota. Finally, the temperature of the fuel in the supply line to the pump will affect the temperature of the fuel initially deposited into the vehicle, the GAO said.

It's not like there hasn't been any attempt in the US and other countries to address the problem. The GAO notes that Hawaii adopted gasoline temperature compensation more than 26 years ago because, according to Hawaiian officials, it provided purchasing equity for both the industry and the consumer.

Belgium mandated temperature compensation beginning in January 2008 to help ensure greater consistency in the energy content of the fuel sold to consumers. To improve measurement accuracy and equity, among other things, Canada developed standards in the early 1990s that allowed, but did not require, retailers to sell temperature-compensated fuel, according to a Canadian official, the GAO stated.

In the US, officials from eight states that prohibited automatic temperature compensation said the decision should be based on an analysis of the costs and benefits, with some expressing concern that the anticipated costs would outweigh any benefit to consumers and fuel retailers, the GAO said.

Meanwhile governments have not formally studied the impact of their decisions to implement or allow automatic temperature compensation. Specifically, neither Hawaii nor Canada has studied the impact of temperature compensation, although officials reported it had been well accepted by both consumers and the industry and was not controversial. In Belgium, temperature compensation has not been in effect long enough to study its impact, the GAO stated.

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