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By Robert Rapier on Mar 27, 2007 with no responses

More on Hot Gas Lawsuit

I really love my Site Meter at the bottom of the page. I check it most days, and it gives me a lot of good information about who is linking to the site and where they are coming from. Incidentally, you can access the same information I can see by clicking on it.

Anyway, a few days ago I wrote Hot Gas Lawsuit in Utah. It is about a class action lawsuit that claims that oil companies are making a killing from overcharging customers because gas expands in the summer. According to my Site Meter, I was getting some hits on this article, which I ultimately tracked back to here. The discussion was fine, until one of my beloved fringe elements weighed in:

Rapier works for an industry that lobbies against temperature sensing smart pumps in the United States, but lobbied FOR regulatory changes requiring these devices in Canada in the 1990′s. I don’t believe they got the regulation they wanted, but in any case the market did its job and about 95% of retail outlets now have these devices installed.

Why? Because they were losing money in Canada because of cold fuel; i.e. selling more energy per volumetric unit because of shrinkage due to cold temperatures.

Rapier’s line on ground temperatures is a crock.

I have engaged this guy before. He reads a few websites, and thinks he is an expert. You see it all the time. Now, I have no idea about the claim on the situation in Canada, and I guarantee you that neither does he. He read it on a web site, and it became fact. But in this case, the troll actually provided the very evidence that showed that my “line on ground temperatures” was spot on. Here is what I wrote previously:

In fact, those tanks are probably pretty close to 60 degrees year round, which means the class action lawsuit is just a waste of the court’s time.

Now, recall the reasoning behind the lawsuit. From the original article:

When a gallon of gasoline is 60 degrees it exactly will fill a one gallon container. But that same gasoline at 90 degrees would spill over the sides of the container. It is that spillage that represents the energy drivers allegedly paid for, but didn’t get, when they purchased a gallon of “hot gas.”

But, my troll, following his charge that my line was a crock, provided the link that showed that it wasn’t:

Technology, new rules a hot-fuel fix

The Star’s $2.3 billion estimated annual cost to consumers from hot fuel is based on fuel storage tank temperature data, the impact of varying temperatures on fuel volumes, and state-by-state consumption data.

The fuel temperature data was gathered by the National Institute of Standards and Technology from storage tanks at 1,000 gas stations and truck stops in 48 states and the District of Columbia during a period from 2002 to 2004.

The NIST data revealed that the average temperature of fuel across the country and year-round was 64.7 degrees Fahrenheit — almost 5 degrees higher than the government standard of 60 degrees.

As a liquid, gasoline expands and contracts depending on temperature. At the 60-degree standard, the 231-cubic-inch American gallon delivers a certain amount of energy to your engine. But that same amount of gas or diesel fuel expands at higher temperatures, to about 235 cubic inches at 90 degrees. Yet consumers still get only the 231 cubic inches at the pump.

As I said, pretty darn close to 60. Definitely not close to 90. So what does this really cost consumers? I suspect the Star made a math error in their calculation. Here is why. The average gasoline consumption from 2002 to 2004 was 8.9 million barrels per day. You can get all of that data here. That translates into an average over that time period of 136.5 billion gallons per year. The average spot price of gasoline, which can be retrieved from here, was only $0.93/gallon over that time period. Don’t believe me? Look it up at the link. We forget that it wasn’t want that long ago that gasoline was still quite cheap relative to today. Also remember that these are spot prices, which don’t include taxes. This is an indicator of what refineries got for their gas during the 2002-2004 period that the Star investigated.

Now, note the change in going from 60 degrees to 90 degrees. The difference is 4 cubic inches, an increase of 1.7%. (My chemical engineering handbook says it is more like 1%, but we will give them the benefit here). But the average wasn’t 90 degrees, was it? It was 64.7 degrees. Interpolating, the change for that is going to be 0.27% (based on their 1.7% for the full range). That’s right, between 2002 and 2004, consumers were ripped off to the tune of 0.27%. That means that for every gallon of gas sold during this period, consumers were getting ripped off by less than 1/4th of a cent per gallon. So, each time you put 4 gallons of gas in, you lost almost a penny on average (and some fraction of a penny more to the government for taxes). And as I have pointed out, the energy difference from blend to blend can easily amount to more variation than this.

So, what was the total lost? Was it $2.3 billion per year as the Star claimed? Not even close. The actual number is about a tenth of what the Star claimed. I suspect their error was to assume the entire expansion to 90 degrees, instead of using the average annual number of 64.7%.

Frankly, I hate wasteful spending, but if they force the equipment to be installed, that’s just one more thing that will drive up the price of gas (you don’t think there’s a free lunch, do you?). I am all for things that drive up the price of gas and spur conservation. Of course Jamie Court, president of the FTCR, claims he is waging war on this issue to keep consumers from getting ripped off. He has got to be one of the most naïve individuals I have ever seen. He seems to have in his mind that he is going to “sock it to” the oil companies and score one for consumers. And the lawyers are also out trying to make sure the consumers are protected. I just wonder if any of them actually believe that any of this is going to bring down the cost of gasoline?