[A-List] When Consumers Feel the Heat, Big Oil Makes Cold Cash

[Bill Totten]

When it's hot outside, gas expands. So do the profits of oil companies,
which are taking advantage of basic thermal science to squeeze billions
of dollars a year out of consumers.

by Brian Beutler, The Media Consortium

MotherJones.com (August 132007)


It's probably intuitive to most people that the gasoline in their fuel
tank expands in the heat - just like doorframes and cookware and
everything else on the planet. What's probably less intuitive is that,
in the United States, this physical phenomenon pumps a nearly $2 billion
annual windfall out of consumers' pockets and into oil company coffers,
according to numerous calculations, including a recent House of
Representatives study.

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 Representative 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.

Temperature is just one of the many variables that determine how much
energy one tank of gasoline contains, and therefore how many miles it
will propel your car. But the effects of temperature change are easier
to calculate than, say, ethanol content or petroleum grade - and are
therefore also easy to correct for.

Here's how it works: A gallon of gasoline contains a certain number of
molecules, which combust in your car's engine to provide it with energy.
If you heat up that gallon of gasoline it will expand, leaving you with
a larger volume of gas than the gallon with which you started. But your
new volume will contain the same number of combustible molecules and
therefore will provide the same amount of energy as it did prior to
being heated. That means a tank full of "hot" gas will provide a car
with less energy than will the same tank full of "cool" gas, which is
why you've probably been advised (correctly) not to buy gasoline when
it's hot outside. Simple, right?

It is if you live in Canada, at least. There, gasoline retailers install
metering systems in their pumps to determine how much the fuel they sell
has cooled or heated from its standardized refinery temperature, and
then adjust the price accordingly. If the fuel has become warmer, it
also becomes cheaper. If it has cooled, it becomes more expensive. Which
is to say that Canadians - to a greater extent than Americans - pay for
the energy they get out of the gasoline and not for the volume of liquid
fuel they purchase.

Of course, on average, Canada is pretty cold and the United States is
pretty hot. So it benefits both retailers and oil companies to correct
for temperature in Canada, but to price by volume in the United States.
But the idea of correcting price for temperature has deep roots in the
industry: oil companies have done so for gasoline wholesalers for nearly
a century. The only ones in the North American energy chain who pay by
volume rather than by energy value are US consumers.

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 regulations 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 US 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 fifty
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
greenlighted its product.

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.

_____

Brian Beutler is the Washington correspondent for the Media Consortium,
a network of progressive media organizations, including Mother Jones.

This article has been made possible by the Foundation for National
Progress, the Investigative Fund of Mother Jones, and gifts from
generous readers like you.

(c) 2007 The Foundation for National Progress

http://www.motherjones.com/news/update/2007/08/heat_big_oil.html?src=email&hed_20070822_ts1_whenconsumersfeeltheheatbigoilmakescoldcash


http://www.billtotten.blogspot.com
http://www.ashisuto.co.jp