Oil executives ‘hiding in a haystack’ during ‘hot fuel’ hearing

| 7/25/2007

Round two of what is shaping up to be a continuing series of congressional hearings on “hot fuel” has left some with a bitter taste in their mouths because of claims made by oil execs.

Testifying under oath, oil company executives from ExxonMobil Corp. and Shell Oil Co. told members of the U.S. House Committee on Oversight and Government Reform’s Subcommittee on Domestic Policy that there would be no consumer benefit to the voluntary installation of temperature-compensation equipment on fuel pumps.

“Shell also does not believe that making automatic temperature adjustment mandatory is warranted because the equipment cost would likely raise prices for consumers and might drive some independent operators out of business,” said Hugh Cooley, vice president and general manager of Shell Oil Co.’s National Wholesale and Joint Ventures division.

The hearing also included the question of why the same global oil companies voluntarily adjust for temperature in Canada – where the fuel is cooler. “Hot fuel” refers to fuel sold warmer than the century-old standard of 60 degrees. The warmer the fuel, the more it expands and the less energy content per gallon.

The Shell official, along with Ben Soraci, U.S. retail sales director for ExxonMobil Fuels Marketing Co., said they do not buy into a statement from Measurement Canada that temperature compensation benefits consumers. Measurement Canada is the Canadian counterpart to the U.S. Conference on Weights and Measures.

“I don’t believe that statement is true,” each one said after subcommittee member Rep. Diane Watson, D-CA, displayed a quote from Measurement Canada on the benefits of temperature adjustment to consumers.

The oil company positions on temperature compensation do not sit well with hot fuel watchdogs such as John Siebert, project leader for the Owner-Operator Independent Drivers Association Foundation.

Siebert’s research helped blow the lid off of the hot fuel issue, as owner-operators measuring fuel temperatures determined they were getting worse fuel mileage in Southern states and during the heat of summer.

“Big oil was hiding in a haystack of straw that they brought themselves,” Siebert said of the hearings.

Even the subcommittee chairman, Rep. Dennis Kucinich, D-OH, called the executives out on some of their claims.

Kucinich cited a recent survey of all 50 states by the National Institute of Standards and Technology about their weights and measures laws.

He said 42 states permit temperature compensation on a voluntary basis.

“By and large, most states permit temperature compensation at both the wholesale and retail level,” Kucinich said. “Temperature compensation is only expressly prohibited in nine states.”

Throughout the hearing, Kucinich brought the focus back to hot fuel.

Reps. Darrell Issa and Brian Bilbray, both Republicans from California, wanted to talk about the effects of ethanol blending on fuel energy content.

Bilbray said “misguided government policies” to mandate ethanol content in gasoline, under the guise of protecting consumers and the environment, have done more to raise fuel prices at the pump than hot fuel, although he acknowledged that oil companies have also contributed to the cost increases.

“Good intentions do not make fuel any more affordable or any cleaner,” Bilbray said.

Kucinich returned the discussion to hot fuel. About an hour into the hearing, Democratic subcommittee members Watson, Danny Davis of Illinois and Elijah Cummings of Maryland entered the room to ask questions of the oil executives.

The ExxonMobil and Shell executives did not stray from their written testimony, toeing the long-known industry line that temperature compensation would not benefit consumers and would only hurt independent retailers who would be forced to pass on higher prices.

Kucinich remarked that the average retail fuel temperature, according to the National Institute of Standards and Technology, is more than 66 degrees, while fuel companies sell their products wholesale at volumes compared to a 60-degree standard. Somewhere in the difference between the two numbers, he said, the consumer is getting ripped off.

The subcommittee staff determined through NIST statistics that hot fuel could cost consumers an extra $1.5 billion this summer alone. The oil executives testified they believed consumers are not being harmed by the lack of temperature compensation on fuel pumps.

“The retail market for gasoline is highly competitive, and Shell firmly believes that market prices take into account the absence of temperature compensation,” Cooley stated in his written testimony which Shell shared with Land Line.

Kucinich also raised the topic of taxes collected on fuel, implying that the government is losing tax revenue on each gallon sold at temperatures exceeding 60 degrees.

The oil executives testified to the opposite, saying that a temperature-compensated gallon, if it were mandated by the government, would cause the government to lose tax revenue.

Subcommittee members agreed that a further hearing would be necessary to sort out some of the testimony, particularly in regard to the NIST statistics on states that allow voluntary temperature compensation.

“I’m puzzled with your disagreement with weights and measures,” Watson said.

Some of the testimony caused some subcommittee members to demand answers in writing to several of the points made.

– By David Tanner, staff writer