‘Hot fuel’ adjustment proposed in Missouri bill
Two Missouri representatives have filed legislation requiring that the volume of retail motor fuel sold in the state be adjusted for temperature changes.
The measure, to be considered by the Missouri General Assembly in the legislative session that begins next month, would divide the state into 10 districts, with a temperature-adjusted gallon tailored to each one based on the district’s average temperature. The legislation is meant to change the current system, which makes no adjustment for temperature fluctuations at the retail pump.
“It is something that is not right and needs to be corrected,” said Kate Meiners, a Democrat representing southern Kansas City, Grandview and part of Lee’s Summit. The co-sponsor of the bill is Edward Wildberger, a Democrat representing St. Joseph.
The legislation would become effective in January 2008.
Meiners said she decided to file the bill when constituents contacted her after reading stories about “hot fuel” in The Kansas City Star. The series, which began in August, explored the effects of selling fuel when its temperature rises above the industry standard of 60 degrees. The industry and regulators agreed to the standard nearly a century ago, even though it is virtually unknown to the average consumer.
The physics of hot fuel is fairly simple. Fuel expands and contracts depending on temperature. At 60 degrees, the 231-cubic-inch U.S. gallon puts out a certain amount of energy. But fuel is often sold at much higher temperatures, causing the gas to expand and the amount of energy, by volume, to decrease. Yet consumers still get only 231 cubic inches per gallon, since retail pumps in the United States make no adjustment for changes in the volume caused by temperature.
The Star reported in August that consumers were being overcharged an estimated $2.3 billion annually at then-current prices for gasoline and diesel because of the hot-fuel phenomenon. That figure also accounted for fuel sales below 60 degrees, which occasionally benefit consumers.
Even at the current lower gas prices, the cost of hot fuel to consumers reaches $1.7 billion a year.
Even though the industry doesn’t adjust for hot fuel at the retail level, The Star reported that volumes are carefully adjusted for temperature at other stages in the fuel distribution channel. Moreover, the industry has embraced temperature adjustment at the retail level in Canada, where cold fuel could pinch profits.
The biggest impact of selling hot fuel is on consumers in Sun Belt states such as California, Arizona, Texas and Florida. But consumers in Midwestern states, including Missouri, also are affected. Consumers in Missouri pay an estimated extra $12 million per year, at current prices, because of hot fuel.
The Star’s hot-fuel coverage prompted California’s attorney general to launch an investigation into whether that state’s consumer protection laws had been violated. Legislation has been filed in Texas to address the issue. A multistate class action lawsuit has been filed against major oil companies and fuel retailers seeking compensation for consumers. And state regulators representing 25 states have submitted draft recommendations to address the issue of temperature compensation.
In recent months, the American Petroleum Institute and other industry groups, including the Petroleum Marketers Association of America, have stepped up their opposition to temperature adjustment of fuel at retail.
Industry officials contend that the cost to retrofit retail pumps with readily available temperature-adjustment technology would be in the “billions of dollars,” which they say would have to be passed on and would likely offset any savings that consumers might gain.
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