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Groups Charge Big Oil With Consumer Fraud of More Than $2 Billion Annually: Hot Motor Fuel Pumps Less Energy

Dec. 14, 2006

Groups Charge Big Oil With Consumer Fraud of More Than $2 Billion Annually: Hot Motor Fuel Pumps Less Energy

Petroleum Retailers Overcharge Motorists for Overheated Fuel and Pocket Taxes Paid by Consumers

WASHINGTON, D.C. – Truck drivers and motorists in seven states filed a complaint Wednesday against seventeen oil companies and gasoline and diesel retailers for overcharging at the pump for fuel heated above the industry standard. This “hot fuel” provides less energy than a standard gallon and bilks consumers of more than two billion dollars nationwide, according to information released at a telephone press conference held today to announce the lawsuit.

“Automobile travel and small truck traffic will be heavy during this holiday season,” said Public Citizen President Joan Claybrook, who participated in the press conference. “This lawsuit comes at a particularly appropriate time to expose a system that has been quietly picking money from the pockets of citizens throughout the country.”

For decades, fuel retailers have been overcharging drivers by selling gasoline or diesel that is warmer than the industry standard of 60 degrees. Like all liquids, the volume of fuel expands and contracts when the temperature changes. Hotter fuel has less energy in each gallon than cooler fuel. Regardless of whether fuel temperature rises due to radiant heat from the sun or the refinery process, the results are the same: consumers pay more for less energy.

Those who buy fuel in bulk, such as the U.S. armed forces, have temperature-adjusted purchase agreements with the oil industry. In fact, fuel is adjusted for temperature all along the distribution line except at the end point, when it is delivered to individual consumers. With U.S. retail pumps, motorists never know how much energy they will receive from a gallon of motor fuel. By some estimates, retailers are shortchanging drivers 760 million gallons per year.

The class-action lawsuit charges the petroleum retailers with breach of sales contract and consumer fraud and seeks relief for motor fuel consumers in the states of California, Texas, Florida, Arizona, New Jersey, North Carolina and Virginia.  It calls for remedies in the form of restitution and the installation of temperature correction equipment for pumps that dispense gasoline and diesel fuel. The seventeen companies charged in the suit are Alon USA, Inc., Ambest, Inc., Chevron USA, Inc., Circle K Corporation, Citgo Petroleum Corporation, ConocoPhilips LLC, Costco Wholesale Corporation, Flying J., Inc., Petro Stopping Centers, L.P., Pilot Travel Centers LLC, Inc., 7-Eleven, Inc., Shell Oil Products Company, LLC, Tesoro Refining and Marketing Company, The Kroger Company, TravelCenters of America, Inc., Valero Marketing and Supply Company and Wal-Mart Stores, Inc.

For Big Oil, hot fuel overcharges add up to huge, ill-gotten windfalls. To add insult to injury, the oil industry also benefits from state and federal tax loopholes related to overheated fuel. Gasoline and diesel fuel is measured and taxed at the time it is bought at wholesale. Any additional amount of taxes paid by motorists at the pump buying hot fuel does not go to federal and state governments to repair our highways, roads and bridges – it goes straight into the pockets of the oil companies and retailers.

But the oil industry’s opinion about temperature-adjusted motor fuel pumps at the point of retail sale depends on where it is standing. While it opposes temperature compensation in the United States, it embraces it in Canada, where it stands to lose money from selling “cold fuel” that has more energy than the standard gallon. The industry has voluntarily implemented the use of temperature control equipment at retail pumps in Canada and supported legislation there to make the technology mandatory at the point of sale.

“Although the industry claims that the cost of hot fuel amounts to pennies for individual consumers, it really adds up to a $50 tax on every car in the country,” said John Siebert, project manager of the Owner-Operator Independent Drivers Association (OOIDA) Foundation and a participant in today’s conference call.

“We joined this lawsuit because it’s hard enough to make a living out here,” said Becky Rushing, who along with her husband Mark is part of an owner-operator trucking team that represents two of the millions of motorists that constitute the class in this case. “We see truck drivers every day who have to give up their trucks and get off the road without these oil companies taking advantage of us, too.”

“Ultimately, Congress needs to protect U.S. consumers against the industry-wide practice of hot fuel overcharges – but in the absence of government protections, the only solution is for consumers to band together and force a remedy through the legal system,” said Claybrook.

To read Public Citizen President Joan Claybrook’s statement, click here.

To read independent truck drivers Mark and Becky Rushing’s statement, click here.

To read a fact sheet about hot fuel, click here.

To read the lawsuit filed in California, click here.

To read the lawsuit filed in New Jersey, click here.