Debut of fix for ‘hot fuel’ on hold:

Published on

A company backs off plans to sell retail pumps that would solve the problem in California.

The Kansas City Star (Missouri)

An effort in California to end the sale of “hot fuel” may be blunted by pressure from the oil industry to keep retail pumps that would fix the problem off the market.

California regulators recently issued a pump-making company the nation’s first “certificate of use” for fuel dispensers that would allow gas stations to start selling fuel adjusted for temperature.

In doing so, the nation’s largest fuel-consuming state jumped to the front of a national movement to stop the sale of hot fuel, which is costing consumers an estimated $1.7 billion annually.

“It’s legal right now in California” to sell temperature-adjusted fuel, said Dennis Johannes, director of California’s Division of Measurement Standards.

If only consumers could find a pump.

Gilbarco Veeder-Root, the manufacturer that sought the certification, has for years offered a temperature-adjusting pump in Canada — where cold temperatures would otherwise condense fuel and crimp industry profits. But a Gilbarco spokesman now says the company has abandoned plans to sell the temperature-adjusting pump in California or anywhere else in the United States.

Lucy Sackett, marketing communications manager for Gilbarco, confirmed the company had no plans to sell the pump in the United States, and had also dropped plans to certify a retrofit kit for existing fuel pumps. She characterized the moves as “business decisions.”

Gilbarco decided there would not be demand from its customers — oil companies, gas stations and truck stops — for the pumps or retrofit kits that would make temperature-corrected fuel available.

The company, a subsidiary of Danaher Corp., posts revenues of more than $650 million annually selling equipment to the retail petroleum industry.

“It doesn’t make sense for us to move on it at this time,” Sackett said. “We have to listen to our customers.”

Sackett stopped short of saying Gilbarco customers threatened to take their business elsewhere. But other people close to the company say the decision was made after complaints from the oil industry about plans to sell the temperature-adjusting pump in California.

“There was a backlash against the company and they feared it could get worse,” said a person with knowledge of the situation.

Hot debate

The Kansas City Star, in a series of stories beginning in August, explored the effects of “hot fuel” — when the fuel temperatures rise above the industry standard of 60 degrees.

The industry and regulators agreed nearly a century ago to use a 60-degree standard when determining the volume of a gallon of fuel. The standard has been virtually unknown to the average consumer.

The physics of hot fuel are fairly simple. Fuel expands and contracts depending on temperature. At 60 degrees, the 231-cubic-inch U.S. gallon puts out a certain amount of energy. But fuel is often sold at much hotter temperatures, causing the fuel to expand and the amount of energy, by volume, to decrease.

At other stages in the fuel-delivery chain, the industry routinely adjusts volume for temperature change. But when fuel is sold at retail, consumers still get only 231 cubic inches per gallon, since retail pumps in America make no adjustment for changes in the volume caused by temperature.

Drawing on a nationwide database of retail gasoline and diesel-fuel storage tanks, The Star reported that the average nationwide, year-round temperature of fuel was 64.7 degrees. At current prices, that means consumers are spending about $1.7 billion more on fuel annually than they otherwise would if the energy content of fuel met the standard.

Moreover, the newspaper reported that the technology existed to retrofit retail pumps to dispense fuel on a temperature-adjusted basis. In January, the National Conference on Weights and Measures, which establishes model codes for states to adopt, decided it would vote for the first time on whether temperature-corrected fuel should be allowed at retail pumps.

A final vote, which is to take place in July, would remove a major obstacle to the sale of temperature-adjusted fuel — although approval may not be assured as industry resistance to the change mounts.

But California had already made a decision to allow temperature-corrected fuel on the same voluntary basis as is being considered by the weights and measures conference. California is also one of only a handful of states with a laboratory to test fuel dispensers, which gave the state’s move some extra bite.

It appeared that temperature-corrected fuel at retail pumps was about to make its California debut. The certificate was issued with a couple of conditions, including one requiring that retail receipts state whether the fuel was temperature-corrected.

But the debut of temperature-adjusted retail fuel in America appears to be off — at least for now.

Angry customers

The circumstances surrounding Gilbarco’s decision to back off its plans to sell temperature-adjusting pumps has angered some consumer advocates.

“Now that regulators have done their job and certified technology to cool down the hot-gas market, the oil companies should not be allowed to pressure manufacturers to deny Californians fair and honest accounting at the pump,” said Jamie Court, president of The Foundation for Taxpayer and Consumer Rights in Santa Monica, Calif. “This could be the oil industry’s Waterloo.”

At current prices, The Star estimates California consumers would save about $450 million annually if they purchased fuel that was corrected for temperature.

In contrast, the onetime cost of equipping pumps to make the adjustment would run about $105 million.

The decision by Gilbarco is a turn for the Greensboro, N.C., company, which describes itself as a leading purveyor of fuel dispensers in the world.

Gilbarco representatives at meetings of weights and measures officials have said they were receiving a growing number of inquiries about purchasing temperature-adjusting pumps.

Previously, the company sought certification from a national testing group, but was rebuffed without the equipment being tested. When told California was willing to certify pumps that would make the temperature adjustment, Gilbarco submitted one of its pumps for testing.

Temperature-adjusted fuel is a sensitive issue for the industry. In recent months, several class-action lawsuits have been filed against the industry seeking compensation for consumers who claimed they were bilked by the sale of hot fuel.

The American Petroleum Institute and other industry groups, including the Petroleum Marketers Association of America, have opposed temperature adjustment of retail fuel. They question the benefits consumers would gain, while contending that a nationwide fix would cost the industry about $2 billion.

Jay McKeeman, government relations director for the California Independent Oil Marketers Association, said there needed to be more study of the issue to ensure there would be benefits to consumers who purchased temperature-corrected fuel.

The marketing group did not urge its members to call Gilbarco to voice their concerns about plans to sell the pumps, McKeeman said. But he acknowledged that he was aware some had made such calls.

Uncertain outlook

It is now unclear whether Gilbarco’s experience may give other companies second thoughts about seeking California certification.

Gord Wedel, a manager with Kraus Global Products, which makes retrofit kits for existing pumps in Canada, said the company would seek California certification. But he added that no decision had been made about when the request would be made.

Johannes of the California Division of Measurement Standards said the agency’s position remained the same. There is nothing in Handbook 44, published by the National Conference on Weights and Measures, that prohibits the retail sale of fuel that has been temperature-adjusted. As a result, it can be allowed
in California.

Johannes said California was ready to test other pumps and retrofits kits for certification. And the agency has asked Gilbarco to notify it if and when it begins selling a pump with temperature-correction equipment in California.

“It’s just a matter of someone selling the pumps,” Johannes said. “We’re waiting for the other shoe to drop.”
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To reach Steve Everly, call (816) 234-4455 or send e-mail to [email protected]

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