Wednesday, June 20, 2007

Real Price Gouging At the Pump

I usually roll my eyes at people who make allegations that oil companies are gouging consumers. Most of these people have no evidence, just outrage at the high profits oil companies earn when prices are high. This article from MSN Money actually makes some solid points and shows how gas stations (not necessarily oil companies) are ripping off consumers in the summer months:

As Mercury Rises, Motorists Get Burned: As the temperature rises, gasoline expands, and the amount of energy in each gallon drops. Because gas is priced at a 60-degree standard and gas pumps do not adjust for temperature changes, motorists often get less bang for their buck in warmer weather.

Almost a century ago, the industry and regulators agreed to define a gallon of gasoline as 231 cubic inches at 60 degrees. But as the mercury rises and gasoline expands, it takes more than a gallon of gas to produce the same amount of energy. The opposite is true when gasoline contracts in colder weather.

Gas retailers ignore the temperature swings and always dispense fuel as if it's 60 degrees. As a result, gas is an average of about 5 degrees warmer than the federal standard, according to a study analyzed by Dick Suiter of the National Institute of Standards and Technology.

In frigid Canada, where cold temperatures were giving consumers an edge, many gas stations voluntarily backed a program to add pumps that automatically adjust volumes based on temperature.

During the energy crisis in the 1970s, tropical Hawaii decided to set a base fuel temperature of 80 degrees, meaning that consumers there get more bang for their buck because retailers now dispense 234 cubic inches of gas per gallon rather than 231. The federal government is considering a similar change as well. The National Conference on Weights and Measures is to vote in July on whether to allow temperature regulation by retailers.

The upcoming decision is worrying some fuel distributors, who say the new equipment could force some independent dealers out of business. NATSO, a trade group representing truck-stop owners, estimates that each retrofitted pump could cost between $1,500 and $3,800.

"The average truck stop has 20 pumps," said Mindy Long, a spokeswoman for the group. "The burden on them would be phenomenal."

Lobbyists are paid to represent their constituents, but this Mindy Long must have no shame. Her argument is essentially this: “it would be a phenomenal burden on gas stations and truck stops to treat their customers fairly.” Hahaha!

Her argument is even more ridiculous because, according to the article, gas stations in Canada have retrofitted their pumps. The reason they did so is that they were giving consumers too much gas (because the gas is denser at lower temperatures). So it’s ok for gas stations to retrofit their pumps so they do not get ripped off but it’s a “great burden” for them to retrofit their pumps so the consumer doesn’t get ripped off.


David said...

hmmmm who owns the gas pumps?

Will said...

As I understand it, most gas stations are owned by individuals. They are franchises just like Subway or a Marriott hotel.