Actual temperature compensation equipment costs remain unclear, GAO says

The costs of requiring gasoline retailers to install equipment to compensate for temperature changes remain unclear despite decades of debate within the US weights and measures community, the US Government Accountability Office said.

It's also unclear whether businesses or consumers would end up paying the additional costs, GAO said in a report issued on Oct. 15. The two governments with the most retail fuel sales temperature compensation experience, Hawaii and Canada, have not studied the effect of their policies, the congressional watchdog service added.

"As a result, a policy debate is being played out without good information about the potential costs and benefits, and with both proponents and opponents basing their opinions on their professional judgment and their general understanding of economic theory," GAO indicated.

It suggested that a fuller study is needed to objectively analyze issues which stakeholders raised about costs and benefits, including the potential for higher costs to consumers and improved inventory management for retailers. "Such a study would need to bring together petroleum-related scientific, engineering and economic expertise," it said.

Without such analyses, the National Conference of Weights and Measures and state governments which regular retail weights and measures "face potentially significant challenges to informing their decisions regarding automatic temperature compensation," GAO said in its report.

US House Science and Technology Chairman Bart Gordon (D-Tenn.) asked GAO earlier this year to examine the retail motor fuel temperature compensation question in response to concerns that motorists were not receiving the full amounts indicated as temperatures climb. Rep. Dennis J. Kucinich (D-Ohio), chairman of the Oversight and Investigations Committee's Domestic Policy Subcommittee, held two hearings in 2007 addressing what he termed "the hot fuel issue."

The volume of gasoline expands or contracts by 1% for each 15-degree increase or decrease in temperature while the fuel's energy content remains the same, according to GAO. "For example, 10 gallons of gasoline at 60 degrees Fahrenheit expands to 10.2 gallons at 90 degrees F but maintains the same total energy content. As a result, the average energy content per gallon of the 90-degree fuel will be less than that of the 60-degree fuel," it said.

It said that requiring motor fuel retailers to install automatic temperature compensation equipment on their outlets' dispensing systems would involve costs to purchase, install and inspect new equipment, and to educate motorists about the change.

Some stakeholders said that it would cost an estimated $1,300-3,000/pump to install new equipment and $900-1,800/pump to buy a kit for retrofits along with a $200 installation charge, GAO said. But the estimates were based on professional judgment, general economic theory and assumptions on how fuel markets operate instead of actual studies and other data, it noted.

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