The effect of temperature on fuel volume varies depending on the density  of the fuel. 1). State and local governments adopt and enforce weights and measures  regulations, including those to ensure that retail fuel pumps accurately  measure motor fuels. NIST publishes NCWM’s newly  adopted model regulatory standards in handbooks. The Magnitude of Equipment and Education Costs of Adopting Automatic Temperature Compensation Is Unclear

Stakeholders said that implementing automatic temperature compensation  for retail fuel sales would involve costs to purchase, install, and inspect  new equipment on gasoline pumps, as well as costs to educate consumers  about the change. Some stakeholders estimate the costs to purchase and  install the temperature compensation devices would range from $1,300 to  $3,000 per pump. These  manufacturers said the costs can vary by the type of equipment. A small number of  state officials said that automatic temperature compensation could  increase inspection time by 20 to 50 percent and might require the  purchase of testing equipment. In contrast, officials in three other states  said that inspection costs to adopt temperature compensation would not  be significant, although they had not estimated the cost. No stakeholders have developed estimates of the costs to educate  consumers when automatic temperature compensation is in use. It Is Unclear Who Would Bear the Costs of Implementing Automatic Temperature Compensation

Stakeholders differ on whether consumers or a combination of retailers  and consumers would bear the costs of implementing automatic  temperature compensation. Specifically, many stakeholders, including  state officials and industry representatives, said that the costs to purchase,  install, and inspect compensation equipment would be passed on to  consumers, generally through higher retail fuel prices, higher prices for  nonfuel goods sold at retail fueling stations, or a combination of both. However, other stakeholders, such as consumer groups, said that retailers  and consumers would share in both the costs and the benefits of  implementing temperature compensation. For example, one stakeholder  noted that some retailers could use funds they receive from the major oil  companies for remodeling to cover the cost of temperature compensation  equipment. Regardless of their views, stakeholders based their opinions largely on  professional judgment and general economic theory or assumptions about  how the fuel market operates rather than on studies or other data. In contrast, other stakeholders said  that retailers may already adjust their prices to account for the expansion  and contraction of fuel, while still others questioned the benefit to  consumers from investing in temperature-compensating devices in areas  where the average ambient temperature is close to 60 degrees F.
The majority of stakeholders—including state officials, consumer and  industry representatives, and fleet owners—said that a cost-benefit study  such as the one under way in California would provide policymakers with  important information. Governments That Have Adopted Automatic Temperature Compensation Did So Largely to Improve Purchasing Equity, and Those That Have Not Cited Concerns That the Costs Would Outweigh the Benefits

Governments that have adopted or permitted automatic temperature  compensation, or are considering doing so, cited improved measurement  accuracy and greater equity between retailers and consumers as reasons  for making the change, whereas those governments that do not allow  temperature compensation cited concerns that the costs would outweigh  the benefits. Belgium adopted temperature compensation  for retail sales, in part, because some retailers were artificially heating  fuel, and the government sought greater consistency in the energy content  of the fuel sold to consumers, according to a weights and measures  official. Specifically, Canada established  technical and other standards in the early 1990s that allowed retailers to  sell temperature-compensated fuel, but it did not require them to do so. In the United States, officials in eight states that have laws or regulations  prohibiting automatic temperature compensation largely said the decision  should be based on an analysis of the costs and benefits, with some  expressing concern that the anticipated costs would outweigh any benefit  to consumers and fuel retailers. In some cases, these decisions were made  more than 20 years ago, and the officials we interviewed had limited  information about the reasons. To develop the  questions, we reviewed NCWM and National Institute of Standards and  Technology (NIST) documents, as well as congressional testimony.
Why GAO Did This Study

The volume, but not the energy content, of hydrocarbon fuels, such as gasoline and diesel, varies in response to changes in temperature. Thus, because of expansion, the energy content per gallon of 90 degree fuel is less than that of 60 degree fuel. States and localities adopt and enforce weights and measures regulations, often using the model regulatory standards published by the National Institute of Standards and Technology (NIST). Although technology now exists to compensate for the effects of temperature on gas volume, the costs of doing so at the retail level have become the subject of much debate among weights and measures officials, consumer groups, and representatives of the petroleum and fuel marketing industries. GAO was asked to provide information on (1) the views of U.S. stakeholders on the costs to implement automatic temperature compensation, (2) the views of U.S. stakeholders on who would bear these costs, and (3) the reasons some state and national governments have adopted or rejected automatic temperature compensation. To do this work, GAO reviewed NIST and other documents and congressional testimony; interviewed stakeholders from 3 federal agencies, 17 states, and 15 groups representing a variety of interests, including consumers, truck drivers, and the oil and gas industry; and interviewed officials in 5 other nations. Various stakeholders and officials provided technical and other comments, which were incorporated in the report as appropriate

What GAO Found

The costs to implement automatic temperature compensation are unclear. Most stakeholders said that implementing automatic temperature compensation for retail sales would involve the cost to purchase, install, and inspect new equipment on pumps, as well as costs to educate consumers about the change. Some stakeholders said the costs to adopt automatic temperature compensation ranged from $1,300 to $3,000 per pump, but none had estimated the total costs nationwide, in part because complete data are not available. Estimates of the cost to inspect the new equipment varied. Officials in a small number of states said inspection times would increase by 20 to 50 percent, while officials in three other states said the costs would not be significant. No stakeholders had developed estimates of the costs to educate consumers. Stakeholders differ on whether retailers, consumers, or both would ultimately bear the costs of implementing automatic temperature compensation at the retail level. Some stakeholders, including state officials and industry representatives, said that the costs would be passed on to consumers through higher prices for fuel or other goods sold at retail stations. Others, such as consumer groups, said that retailers and consumers would share the costs and benefits. That is, some retailers could use funds they receive from major oil companies for remodeling to pay for the equipment. These stakeholders also said the benefits include consistent energy content for consumers and improved inventory management for retailers. Stakeholder views were largely based on professional judgment and general economic theory rather than on studies or other data, and most stakeholders said that a comprehensive cost-benefit analysis would provide policymakers with important information. Governments that have adopted or permitted automatic temperature compensation for retail fuel sales cited improved measurement accuracy and greater equity between retailers and consumers as reasons for making the change; those that have prohibited it largely cited concerns that the costs would outweigh the benefits. Hawaii adopted temperature compensation more than 26 years ago because it provided purchasing equity for the industry and consumers. In 2008, Belgium mandated temperature compensation to help ensure more consistent energy content for consumers. Canadian officials cited improved measurement equity and accuracy as reasons for allowing retailers to sell temperature-compensated fuel in the early 1990s. In the United States, officials from eight states that have laws or regulations that prohibit automatic temperature compensation said the decision should be based on an analysis of the costs and benefits, with some expressing concern that the costs would outweigh the benefits. None of the governments that have adopted automatic temperature compensation have studied its impact.