Agreement for Costco Gas Stations Would Adjust Fuel for Temperature in Several States
Oil Companies Will be ‘Making Fairness Illegal’ if They Try to Stop Costco Deal, says Consumer Watchdog
Santa Monica, CA — Costco has agreed to settle a lawsuit over the sale of “hot gasoline,” becoming the first U.S. gasoline retailer to do so and setting a possible national precedent, said Consumer Watchdog. The group applauded the discount chain and urged others to break ranks with the oil industry and sell “fair fuel.”
“This is fantastic news for consumers,” said Judy Dugan, research director of the nonprofit, nonpartisan consumer Watchdog. “Costco is taking the lead in offering drivers gasoline that has the same amount of energy in every gallon, living up to its reputation as a consumer-friendly place to shop.”
See the details of the proposed agreement, the “Stipulation of Class Action Settlement”.
The agreement affects Costco motor fuel sales in Arizona, California, Florida, Georgia, Kentucky, Nevada, New Mexico, North Carolina, Tennessee, Texas, Utah and Virginia. The deal, if fully approved, would go fully into effect within five years. Costco would install temperature-sensing pumps that slightly adjust the amount of fuel to same energy content in each gallon. Such pumps are almost universally used in Canada and increasingly in Europe.
Today’s action is just the first big step toward a final settlement involving Costco, and will likely face ferocious opposition from oil companies and bigger name-brand refiners and retailers. The fuel lobby this month pushed Virginia legislators into at least temporarily banning temperature-adjusted sales.
“Oil and fuel lobbyists who try to intimidate state and national regulators into stopping Costco will be trying to make fairness illegal,” said Dugan. “This is the rear-guard action of an industry that is already seen as completely untrustworthy.”
Fairness is the point, said Consumer Watchdog. When the temperature of gasoline rises above 60 degrees, gasoline expands but gas pumps don’t account for the bigger volume, so consumers receive less gasoline than they should. When motorists buy gasoline, they have no idea what the fuel temperature is, even though adjacent stations can vary by 15 degrees. For every 15-degree rise in temperature, 1% of the fuel is lost to expansion. Some big gas stations and truck stops keep their fuel aboveground, in tanks painted flat black. They don’t paint them black for convenience–it’s a perverted use of solar energy to keep the fuel hot, said Consumer Watchdog.
A 2% expansion of gasoline at 90 degrees, at even $3.00 a gallon, is a $1.20 loss on a 20-gallon fill-up. At $4 a gallon, the loss is $1.60. The loss to all drivers nationally adds up to $3 billion or more. California drivers alone lose hundreds of millions of dollars a year to hot fuel.
Listen to Consumer Watchdog’s podcast about Costco’s move.
See more background and information on hot fuel.
The deal, if finalized, will remove Costco from national and state class action lawsuits by drivers–and by truckers, who can lose hundreds of dollars to hot fuel each year.
Costco has long been willing to consider selling gasoline adjusted at the pump to deliver the same amount of energy in every gallon. There were rumors back to late 2007 that Costco was talking with California regulators about being fair to drivers. The company backed down, clearly under industry pressure. At the time, Consumer Watchdog wrote a letter to Costco Chairman James Sinegal encouraging him to sell temperature-adjusted gasoline.
Costco, which usually undercuts the competition on gasoline prices anyway, obviously thinks the cost of installing temperature adjusting pumps—which comes to hundredths of a penny per gallon over the life of a pump, according to the California Energy Commission–is worth it, said Consumer Watchdog.
Consumer Watchdog also recently charged that a conflict of interest affected the outcome of the California Energy Commission’s study on the costs and benefits of fixing the “hot fuel” ripoff in the state. James Boyd, the energy commissioner who led the study, is the spouse of the chief lobbyist for the Western States Petroleum Association, whose most powerful members oppose fixing hot fuel.
See letter to Commissioner James Boyd.
See links to documents showing influence.
Although the state’s Fair Political Practices Commission ultimately stated that Boyd did not have a conflict of interest, it was on the technical grounds that Mrs. Boyd’s direct employer, and Mrs. Boyd, would not foreseeably suffer a loss of income because of the hot fuel study.
“The battle in the California Energy Commission over the effects of hot fuel may foreshadow a battle against Costco’s decision to be fair in its sale of gasoline,” said Dugan. “Ultimately, that battle will damage the already bottom-feeding reputation of oil companies more than it will save them from cheating consumers of a few cents a gallon. They should give it up before their public approval rating hits zero.”
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