California Gas Stations Admit ‘Hot Fuel’ Ripoff

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Refiner Tesoro to Put Decal on Pumps After Lawsuits; Group Calls on Chain to Take Next Step and Sell Temperature-Compensated Fuel

Santa Monica, CA — Refiner Tesoro is putting warning decals on its gas station pumps, including dozens of Shell stations, warning that consumers may not get all the energy they paid for in a gallon of gasoline, according to industry reports today. Instead of a warning on the pumps, Tesoro should sell gasoline that is compensated for high temperatures that cause the fuel to have less energy per gallon, said the Foundation for Taxpayer and Consumer Rights.

“The warning labels are acknowledgement of this long-time oil industry ripoff of motorists just as they begin their holiday trips,” said Judy Dugan, research director of and FTCR. “More consumers will understand what’s causing their summer dropoff in gas mileage and be furious. Tesoro would be better off if it went ahead and sold its gasoline fairly.”

FTCR said lawmakers should move quickly to require that gasoline sales compensate for higher temperatures at the pump.

The report appears in the July 2 edition of Oil Express, an oil industry publication. (see story below) The warning decals are apparently a response to lawsuits charging motorists are deceived by “hot fuel” sales. Gasoline is sold and taxed as though its temperature was 60 degrees. In California and dozens of other states, gasoline is much hotter when sold, so it expands and provides a few cents’ less energy per gallon. (see links below)

According to the report, the 3-inch by 3-inch decals say: “This pump dispenses motor fuel by volume measured in standard gallons (231 cubic inches), as certified by the California Division of Measurement Standards, without adjustment for possible variations due to temperature or other factors which may affect the energy content of each standard gallon dispensed.”

Tesoro has some stations of its own, plus the recently acquired “USA” truck stops and numerous Southern California Shell stations that came with Tesoro’s purchase of a large Shell refinery.

FTCR said the labels, despite their vagueness, will spur motorists’ awareness and demands for fair pricing. However, the Oil Express report says no other chains have yet indicated they’ll follow suit.

“Consumers will soon decode the warning label’s gobbledygook and demand to know why this is allowed when they’re already paying more than $3 a gallon,” said Dugan. “Tesoro is obviously hoping to escape charges of deception, but the industry as a whole can’t escape the injustice of its pricing practices.”

Attempts to order temperature compensation of fuel in the federal energy bill were defeated in the Senate, but a separate bill may be offered later by Sen. Claire McCaskill of Missouri.

In the California Legislature, a purported “hot fuel” measure, AB868, bows to industry by calling for two years of study and discussion before any action can be taken, said FTCR. The pump labels should push state legislators to fix the problem in months, not years.

Nozzle manufacturer Gilbarco already makes a pump nozzle that measures the temperature of gasoline as it leaves the pump, and it is widely used in Canada (where sellers benefit from lower gasoline temperatures). The head of the California Weights and Measures board has stated that the pump may be sold and used in California, but Gilbarco has declined to offer it for sale.

In the Oil Express article, an attorney for distributors and retailers argues that it is illegal to sell temperature-adjusted gasoline. That is certainly not true in California, says FTCR, but the legislature should make it required as well as legal.

“The loss is perhaps 50 cents per hot tankful for individual motorists, but the collective loss is estimated, according to federal data, at about $450 million a year in California,” said Dugan. “Sales must be honest to be fair. Yet the industry from the refinery level on down cheats both motorists and taxpayers by pretending that fuel is 60 degrees in order to fatten their own profits.”

For more information on hot fuel, see: (state by state toll) (stories and background) AB868 bill language

Text from Oil Express Article:

July 2, 2007

Tesoro has become the first retailer to slap decals on dispensers warning that drivers may not get the energy they are paying for because it does not temperature-adjust its fuel, Oil Express learns.

The move by the San Antonio-based refiner could spell trouble for marketers facing fraud lawsuits filed by several class action attorneys.

In the multi-state suits — 12 so far — small, independent truckers claim that retailers and nearly every refiner in the U.S. have cheated them out of energy content by selling “hot fuel.”

Tesoro plans to stick the 3-by-3 inch decals on dispensers at its own stations in California and Arizona and at Shell sites it acquired as part of its $1.63 billion purchase of Shell‘s 97,500 b/d Wilmington, Calif., refinery and 250 associated stations.

The decals say: “This pump dispenses motor fuel by volume measured in standard gallons (231 cubic inches), as certified by the California Division of Measurement Standards, without adjustment for possible variations due to temperature or other factors which may affect the energy content of each standard gallon dispensed.”

Shell also has been named in the class action suits but will not place the labels on its pumps and was not involved in Tesoro’s decision to do so at the Shell sites that the company now owns.

“While Shell believes that such decals are not legally required, Shell expresses no opinion about Tesoro’s decision,” says spokeswoman Anne Peebles. “Shell has no current plans to use such decals… and is unaware of any plans by any other independent Shell-branded wholesalers or retailers to do so.”

Tesoro’s decision to display the decals “will set a dangerous precedent that will spread like wild-fire across the entire U.S.,” warns one PMAA state exec, some of whose members are being sued for failing to temperature-correct their retail sales.

“Retailers in a given market will have no choice but to match their competition by either displaying the decals or installing the temperature compensation equipment,” he says. Not only is Tesoro’s effort likely to draw more “unwanted attention” to the issue, but some in Congress may view it “as a red flag just begging for federal regulation.”

Tesoro’s action is probably lawyer-driven, says jobber attorney Bob Bassman. “It’s an attempt to tell consumers exactly what they are getting, so that Tesoro can shield itself in a lawsuit.” However, since Tesoro was a target of the first temperature compensation suit, the decal is unlikely to do it much good now, says Sarah Dodge, a VP with the National Assn. of Truck Stop Operators.

Tesoro views the decals as a way to reach customers.

“We think this communication is important, given our increased marketing presence in the California market with the Shell and USA retail acquisitions,” says Tesoro’s Natalie Silva. “We want to make it clear that we are squarely aligned with the industry on there being no legitimacy to the hot fuels claims, and our choice to communicate with our customers should not be viewed as us being at odds with the industry.”

As far as Tristan Duncan is concerned, the whole decal issue is moot. Duncan is an attorney representing several retailers and marketers embroiled in temperature compensation suits. “The use of a temperature compensation device in California is currently not lawful at the retail level,” she says.

California Weights and Measures officials have certified a Gilbarco temperature-compensation device, and W&M director Dennis Johannes has said that marketers may now sell temperature-adjusted fuel if they wish (OE 2/26/07, 01/29/07).

That is not the case, says Duncan. “Johannes is not elected by the public. He’s just an administrator. While he may believe that temperature compensation] should be lawful, that doesn’t make it so,” she said.

“The use of a temperature compensation device in California is currently not lawful,” Duncan says. “California legislators would have to change the law to make it lawful. The certification cannot be used unilaterally to do an end-run around the democratic system of law-making.”

Handbook 44, to which most of the states adhere, requires every retailer to dispense a gallon of fuel defined as 231 cubic inches without any reference to temperature-adjustment, she says.

“A court will decide the legal issues,” Duncan adds. “Retailers cannot defraud the public when they have been complying with the laws governing retail sale of motor fuel.”

Copyright 2007, Oil Express

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading nonpartisan consumer advocacy organization. For more information, visit us on the web at: and

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