‘Hot fuel’ costs consumers more when prices rise

| 5/22/2008

Summer temperatures and a continuing surge in fuel prices will amount to a double whammy for consumers this year, advocates say.

The issue of “hot fuel” is of greater concern in times of rising prices, said Joan Claybrook, president of the consumer group Public Citizen, during a press conference Thursday, May 22, in Washington, DC.

“Consumers are paying through the nose for gas today, and they’re really angry,” Claybrook said. “They’d be even more angry if they realized that $2 billion of what they pay is for fuel that they don’t get.”

Hot fuel is defined as retail diesel or gasoline sold to consumers when the fuel temperature is higher than 60 degrees. Retailers and refiners use a century-old 60-degree standard to buy and sell fuel at the wholesale level, but there is no requirement for temperature compensation at the retail pump.

The “extra gallons” created by expansion of fuel in summer heat could cost consumers more than $2.8 billion this year, which is $500 million more than the estimated cost to consumers in 2007, Claybrook and others said.

The press event also included Judy Dugan, director of Consumer Watchdog, and John Siebert, project leader for the Owner-Operator Independent Drivers Association Foundation.

Dugan said consumers are kept in the dark about the amount of fuel energy they purchase at the pump.

“There is absolutely no way for the consumer to tell what the temperature of the gasoline is,” Dugan said.

Siebert said the average trucker drives 110,000 miles in a year. In 2007, a trucker who paid an average of $2.91 per gallon for diesel had a fuel cost of $54,000.

Thursday’s average as reported by ProMiles was above $4.60 per gallon for diesel. If that amount were to be the yearly average for 2008, the same 110,000 miles would cost the trucker more than $84,000.

Even a modest fuel expansion of 1.5 percent in the summer amounts to an annual cost of $1,200 per truck for fuel the trucker never receives, Siebert said.

He said because hot fuel can be traced to percentages, the cost to consumers is higher when the pump price increases.

Siebert said hot fuel costs each automobile driver about $30 per year.

Claybrook said the only solution is regulatory change to require retailers and oil companies to adjust for temperature at the pump. No matter what the actual fuel temperature, a device on the fuel pump would calibrate the volume of the sale to the 60-degree standard.

Regulatory change could come from Congress or the courts, Claybrook said.

Sen. Claire McCaskill, D-MO, filed legislation in August 2007 to phase in temperature-compensation devices on fuel pumps. That bill is currently in the Senate Committee on Commerce, Science and Transportation.

U.S. District Court Judge Kathryn Vratil is currently presiding over more than two dozen consolidated into a class action lawsuits filed by consumers seeking similar reforms. Those lawsuits also demand that the companies pay damages for what the plaintiffs say are ill-gotten gains from hot fuel.

Click here to learn more about hot fuel.

– By David Tanner, staff writer