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Fact Sheet on Hot Fuel

Fact Sheet on Hot Fuel

"It [hot fuel] winds up being a 50 dollar tax on every car in the country."  

Owner-Operator Independent Drivers Association

The Challenge

A Definition of Hot Fuel

Hot fuel is motor fuel sold in the U.S. at a temperature above the century-old national standard of 60 degrees.  At hotter temperatures, fuel expands, reducing the energy content in a gallon.

A Double Rip Off for Consumers

• Consumers pump less energy per gallon of hotter gas than cooler fuel.

As the temperature heats up, liquid motor fuel expands.  As it cools down, gasoline or diesel contracts.  At the standard 60 degrees, a U.S. gallon of gasoline consumes 231 cubic inches.  If the fuel is sold at much hotter temperatures, the gas expands and the amount of energy by volume decreases. Consumers have to purchase greater quantities of diesel or gasoline to obtain the same amount of energy. Gasoline retailers reap the benefits.

Bottom line: Retailers shortchange consumers an estimated 760 million gallons of motor fuel per year.

• Consumers pay taxes intended for road construction and maintenance, but instead the revenue goes to gasoline retailers.

In Texas or another warm state, a retailer buys 10,000 gallons of motor fuel wholesale and pays taxes on that amount.  Since motor fuel is temperature-adjusted at wholesale to the 60-degree standard, the retailer pays taxes on 9,861 gallons of fuel.  Diesel and gasoline is measured and taxed at wholesale, so any taxes collected from drivers above that amount when sold at retail can be kept by the gasoline station, truck stop or oil company station owner. In this case, the retailer will charge consumers for taxes on an additional 138 gallons of gas purchased and pocket the difference. Federal taxes are 18.4 cents per gallon, state taxes

Bottom line: Retailers shortchange motorist safety by avoiding over $350 million in state and federal revenue that would otherwise go to pay for road maintenance and repair.

Facts

1. U.S. consumers overpay more than $2 billion each year for hot fuel.
2. As the price of gas climbs, the harm to consumers increases.
3. The double-layer storage tanks for motor fuel used by station owners contain the heat longer.
4. As the retail industry becomes increasingly consolidated and dominated by high volume outlets, fuel in storage has a less of chance to cool down to ground temperature.
5. With much of the U.S. population moving to warmer states, more and more people buy hot fuel.
6. Currently, U.S. consumers purchase 384.7 million gallons of gasoline per day. (U.S. Department of Energy)
7. Gasoline excise taxes 18.4 cents per gallon for federal taxes and 6 cents to 30 cents per gallon for state excise taxes.

A Brief History

• Gasoline retailers have the know-how to adjust pumps to reflect changes in fuel temperatures.
• Currently, the gas station pump, where consumers purchase the gas, is the only part of the motor fuel pipeline delivery system where temperature adjustments do not occur.
• Large consumers, such as the U.S. armed forces, have had temperature-adjusted purchase agreements for decades.
• In 1990, the oil industry successfully lobbied for temperature-adjusted cold fuel in Canada.
• In 2000, the IRS approved a new rule to close the loophole but the regulation was quietly withdrawn after the Bush Administration took office.
• State officials in California and Texas are investigating how they can stop hot fuel overcharges.

Conversion Costs

Costs of converting from U.S. retail pumps (except Hawaii) to temperature-adjusted dispensers, such as the ones in Hawaii and Canada

Electronic Dispensers

The approximate retail price of ATC retrofit kits range between $900 - $1800 USD per kit/dispenser supporting one, two and three product dispensers. Prices for both kit and labor generally increase with each product being piped into the dispenser. Installation labor is typically 2 - 3 hours or $200 USD per dispenser.

Bottom line: Given an average of 4 dispensers per gas station, the conversion cost per station ranges between $4,400 and $7,300.

(Estimate based on quote from a service provider involved in the aftermarket upgrading of retail petroleum dispensers for electronic and mechanical units in Canada)

Mechanical Dispensers

Most mechanicals registers can be used in after market retrofit applications as well as new dispenser construction (OEM). With our current model one Micon per hose is required. The approximate retail price for the Micon 500 is $1500 USD per Micon/hose. Adapter kits range in price between $5 - $375 USD per kit/dispenser. Installation labor is typically 2 - 3 hours or $200 USD per hose. Note: Mechanical dispensers are typically single and dual hose only.

Bottom line: Using the industry average of 4 dispensers per station, the total conversion cost range from $6,820 and $8,300.

(Estimate based on price quote from producer of an electronic register)

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