WASHINGTON -- Senior executives from two Major Oil companies denied that drivers are overpaying for gasoline because the fuel expands in hot weather and provides less energy per gallon. "The idea that temperature adjustments will somehow give people more for their money simply does not take into account the realities of the gasoline market," Hugh Cooley, a vice president for Shell Oil Co., told the U.S. House Committee on Oversight & Government Reform's Subcommittee on Domestic Policy on Wednesday.
And Exxon [image-nocss] Mobil Corp. retail sales director Ben Soraci said that gas station operators would have to pay to install new measuring devices in dispensers that would factor in temperature changes. Operators probably would pass the cost on "without any additional benefit to consumers.
Critics say that when drivers buy gasoline during hot weather, they are paying as much as $1.5 billion a year in overcharges, said the Associated Press. That amounts to 3 cents to 9 cents per gallon, depending on the pump price and the temperature, consumer advocates say.
Kucinich said the petroleum industry is using what appears to be a double standard in the way they measure gasoline. He said the companies support the use of temperature adjustments in Canada, where gasoline often is cooler than the 60 degree Fahrenheit reference point. But, he said, they oppose them in the United States, where gasoline often exceeds 60 degrees, especially in the South. Kucinich also said the industry long has used temperature adjusted pricing when selling gasoline wholesale.
But Soraci said factoring in temperature in pricing "would violate current laws and regulations" that define a gallon of gasoline as 231 cubic inches. That definition, he said, does not take into account energy content.
The oil executives said energy levels frequently vary slightly in gasoline. Variables include whether it is blended with an additive such as ethanol and where it is refined. Soraci said ExxonMobil would support a study into the costs and benefits of installing temperature adjusting devices into pumps. Shell's Cooley said his company does not believe that consumers "are harmed in any way by not having temperature adjustments at retail dispensers." The current way of measuring gasoline, he said, "just makes good sense. Consumers understand this measurement."
Rep. Darrell Issa (R-Calif.), the top Republican on the subcommittee, said the debate over temperature adjustments was "frivolous" and that much more energy is lost per gallon of gasoline when ethanol is added.
A temperature increase of 20 degrees beyond the reference point would mean a loss of less than 1% in energy per gallon, Issa said. When using an 85% blend of ethanol (E85), there is a 30% energy loss, he said.
The industry executives said a shift toward temperature adjustments would cause confusion for motorists trying to compare prices; make it harder for state and county regulators to ensure the accuracy of pumps; and probably lead gas station operators to raise prices to cover the additional costs.
The issue has led to more than two-dozen consumer-based suits claiming motorists are being overcharged with cases in Alabama, Arkansas, California, Florida, Kansas, Missouri Kentucky, Oklahoma and New Jersey.
Last month, a judicial panel decided to consolidate the suits under the U.S. District Court in Kansas City, Kansas. The court also was examining how to streamline the process and could certify the cases into a class-action suit.
When the subcommittee held its first hearing on the topic on June 8, ExxonMobil and Shell refused to testify. Kucinich then requested a subpoena for those witnesses. On June 22, full committee chairman Rep. Henry Waxman (D-Calif.) wrote to ExxonMobil and Shell, requesting their voluntary appearance at a hearing of the subcommittee to avoid the necessity of a subpoena.
The purpose of the July 25 hearing was to examine the views of ExxonMobil and Shell on two questions: How do they justify opposing temperature compensation at retail, while conducting wholesale transactions with temperature compensation, and how do they justify opposing temperature compensation for retail sales in the United States, while universally embracing temperature compensation at retail in Canada?
Click here for Dennis Kucinich's opening statement.
For Hugh Cooley's (Shell) testimony, click here.
Click here for Ben Soraci's (ExxonMobil) testimony.
To listen to the July 25 hearing webcast, click here.
Click here to listen to the June 8 hearing webcast.
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