Oil Companies Are Using a Simple Trick to Bilk Consumers out of Billions

By Brian Beutler, Media Consortium. Posted August 14, 2007.

It's probably intuitive to most people that the gasoline in their fuel tank expands in the heat -- just like doorframes and cookware and everything else on the planet. What's probably less intuitive is that, in the United States, this physical phenomenon pumps a nearly $2 billion annual windfall out of consumers' pockets and into oil company coffers, according to numerous calculations, including a recent House of Representatives study.

The North Carolina-based company Gilbarco Veeder-Root manufactures a device -- a temperature-sensitive chamber for fuel -- that, if affixed to gasoline pumps across the country, would return that money to consumers and help relieve some of our storied gas-price pressures. The device -- and others like it -- is simple, functional and, in fact, already in widespread use at gas stations all across Canada. Last month, Democratic presidential hopeful and Ohio Rep. Dennis Kucinich, chair of the Domestic Policy Subcommittee, held the second in a series of hearings to investigate why the technology has never made it into the American market.

Temperature is just one of the many variables that determine how much energy one tank of gasoline contains, and therefore how many miles it will pull your car. But the effects of temperature change are easier to calculate than, say, ethanol content or petroleum grade -- and are therefore also easy to correct for. Here's how it works.

A gallon of gasoline contains a certain number of molecules, which combust in your car's engine to provide it with energy. If you heat up that gallon of gasoline it will expand, leaving you with a larger volume of gas than the gallon with which you started. But your new volume will contain the same number of combustible molecules and therefore will provide the same amount of energy as it did prior to the heating. That means a tank full of "hot" gas will provide a car with less energy than will the same tank full of "cool" gas, which is why you've probably been advised (correctly) not to buy gasoline when it's hot outside. Simple, right?

It is if you live in Canada, at least. There, gasoline retailers install metering systems in their pumps to determine how much the fuel they sell has cooled or heated from its standardized refinery temperature, and then adjust the price accordingly. If the fuel has become warmer, it also becomes cheaper. If it has cooled, it becomes more expensive. Which is to say that Canadians -- to a greater extent than Americans -- pay for the energy they get out of the gasoline and not for the volume of liquid fuel they purchase.

Of course, on average, Canada is pretty cold and the United States is pretty hot. So it benefits both retailers and oil companies to correct for temperature in Canada, but to price by volume in the United States But the idea of correcting price for temperature has deep roots in the industry: oil companies have done so for gasoline wholesalers for nearly a century. The only ones in the North American energy chain who pay by volume rather than by energy value are U.S. consumers.

See more stories tagged with: gas prices, kucinich, gas pump, temperature, volume

Brian Beutler is a reporter for the Media Consortium.

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