WASHINGTON -- Chairman Dennis Kucinich (D-Ohio) held a House Domestic Policy Subcommittee hearing last Friday to examine high gasoline prices, specifically addressing the hot fuels problem.
The hearing, called "Hot Fuel: Big Oil's Double Standard for Measuring Gasoline," examined the impact on consumers and attitudes of industry toward the effect of the thermal expansion of gasoline on the practical price of gasoline at the retail pump.
The hearing considered how the petroleum industry in the United States addresses hot fuels, [image-nocss] including both wholesale and retail transactions; steps under way at the governmental level, including matters before the upcoming meeting of the National Conference on Weights & Measures; and how government and industry in Canada have addressed hot fuels and what steps, if any, the federal government should take.
Witnesses included Richard Suiter, Weights & Measures Coordinator, National Institute of Technology & Standards; Michael Cleary, chairman, National Conference on Weights & Measures; Martin Gafinowitz, CEO, Gilbarco Veeder-Root; John Seibert, Owner Operated Independent Truck Drivers Association; Rex Tillerson, CEO, Exxon-Mobil (invited); John Hofmeister, president, Shell (invited); and R. Timothy Columbus, general counsel, National Association of Convenience Stores (NACS) and Society Independent Gasoline Marketers of America (SIGMA).
Seeking to ensure that Congress makes informed decisions about hot fuel, the Partnership for Uniform Marketing Practices (P.U.M.P.) Coalition submitted written comments to subcommittee.
We appreciate your efforts to examine the issue of automatic temperature compensation [ATC] at retail, P.U.M.P. told Kucinich in its statement. However, we urge you to suspend further congressional action, pending the outcome of the National Academy of Science study; consideration of the issue by the National Conference of Weights &d Measures; and a new study being requested by the state of California on the matter.
The comments also attempted to make clear that the issue of temperature compensation is not Big Oil vs. the truck driver/consumer. Large integrated oil companies only own and operate fewer than 8% of the nation's retail outlets. Instead, this issue directly affects the independent petroleum retailing community, many of whom are small, family-owned businesses, they said.
The P.U.M.P. comments referenced the study Rep. Bart Gordon (D-Tenn.), chairman of the House Science & Technology Committee, has asked the National Academy of Sciences (NAS) to conduct. This study will examine the costs and benefits of temperature compensation. We believe that this study will demonstrate that automatic temperature compensation (ATC) will increase the costs borne by fuel consumers. These additional costs would result from the installation of the ATC equipment and from the increase in state administrative expenses required to enforce such a program, P.U.M.P. said.
NATSO, P.U.M.P. member and trade association representing truckstops and travel plazas, has asked Congress to thoroughly examine all aspects of automatic fuel temperature compensation before taking any action to address the issue.
It said in a statement that automatic fuel temperature compensation would be very costly, adding up to millions or possibly even billions of dollars, which could negate any benefit to consumers.
Before we impose potentially crippling costs on retailers, consumers and state authorities, government has a duty to ensure there is compelling data to support such a radical change in how fuel is dispensed in this country, NATSO President and CEO Lisa Mullings said. We're supporting the congressional request for a study on the issue to fully understand and evaluate the impact of temperature variation on consumers. That's the only way that everyoneconsumers and retailers alikecan be assured that this issue is being addressed in a responsible way.
According to NATSO, the Domestic Policy Subcommittee majority staff released a report claiming consumers will pay a hot fuel premium of about $1.5 billion this summer. Most notably, this report does not detail the savings consumers may see in winter months when temperatures drop. It also did not include certain cold-weather states in its analysis, including the Dakotas. NATSO said it believes a thorough, scientific study looking at temperatures year round and in all 50 states and also analyzing the costs and benefits of the devices should be completed.
Mullings added that the emotional, baseless allegations against small businesses that have propelled this issue forward might result in action that could hurt, not help, consumers. It is disappointing that so much of the debate about this issue has been based on information that is wildly inaccurate. We should not make decisions that threaten small businesses based on sound bytes. The government has a responsibility to act in the best interest of consumers, by using sound science and economics to determine the actual impact of automatic temperature compensation.
One of the myths surrounding the issue, she said, is that consumers are not receiving every gallon they purchase. Gasoline is sold by volume only and a gallon is a gallon every time. When consumers buy a gallon of gasoline, they are given a gallon of gasoline, period. That gallon is assured by pumps that are calibrated and regulated by state government authorities. The consumer can be confident in those measurements, Mullings said.
The real issue is not temperature at all, she added, but the manner in which fuel should be measured and dispensed. Different types of fuelssummer and winter blends of gasoline, diesel and alternative fuels like ethanol and biodieselhave a different energy content per gallon. To sell fuel by quantifying energy content instead of by gallon is ultimately confusing for everyone.
Under the current system, consumers can rely on exterior price signs to comparison shop. Permissive temperature compensation will create ambiguity and lead to unequal cost and volume delivery standards from location to location, Mullings said. A gallon is a reliable measurement that has been used by the industry for years and consumers understand it.
She continued, If it was true that retailers in warmer states are profiting unfairly from hot fuel, wouldn't it be true that retailers in colder states would be less profitable than those in warmer states? Yet we know this is in fact not the case, and basic economics support this. In every industry, there is shrinkage due to damage, loss and theft. Fuel prices already reflect differences in temperature. Market competition forces the price down in hot states.
NATSO said it strongly supports Gordon's recent request that NAS study the costs and benefits of temperature compensation, as well as how economics influences temperature variances. We believe that this study will demonstrate that [ATC] will increase the costs borne by fuel consumers and independent, small-business owners, Mullings said.
These additional costs would result from the installation of the ATC equipment and from the increase in state administrative expenses required to enforce such a program.
Click the Download Now button below to read the full P.U.M.P. statement.
Click here to view video of the hearing.
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