Hot Gas is a Bunch of Hot Air
Posted by Robert Rapier on July 23, 2007 - 10:24am
News headlines about the so-called "hot gas" issue have been appearing occasionally in the Drumbeats, so I thought it was time to shine some light on the subject. The Owner Operator Independent Drivers Association (OIDA) recently launched a new website to "educate" people on this issue. And by educate, I mean obfuscate, mislead, and misinform people. Consider for a moment their headline story:
Hot Fuel Costs Consumers More Than 2.3 Billion Dollars Annually
Let's see, Americans consume 140 billion gallons of gasoline and over 60 billion gallons of diesel each year. That means that even if their headline above was correct, the "rip-off" amounts to just over 1 cent a gallon. And given that pricing is set by supply and demand, what will happen with temperature compensation is that the average gasoline price will go up by just over 1 cent a gallon, plus a bit more as every retailer tries to recoup the cost of temperature compensation equipment. Who wins? The makers of the temperature compensation equipment, and the lawyers. Even in the best case, the average consumer who uses about 600 gallons of fuel a year would win $6 a year if you could suspend the laws of supply and demand.
Their new section on myths and facts is an excellent source of misinformation:
Let's look at some of their "myths", and the facts as they see them. And of course the facts as I see them. :-)
MYTH: Fill up in the morning when it’s cooler.
FACT: 35,000-gallon tanks do not dramatically change temperature in daily cycles.
Well, I agree with this one. 35,000 gallon tanks DO NOT dramatically change temperature in daily cycles. That means when the temperature outside rises to 90 degrees, the temperature of the fuel is about the same as it was in the middle of the night when the temperature was 60 degrees.
MYTH: In-ground tanks at gas stations keep fuel at 60 degrees Fahrenheit.
FACT: The insulated, fiberglass tanks tend to keep fuel at the temperature it was delivered… for a long time. Also, larger retailers turn over fuel supplies very rapidly, greatly reducing the time the fuel spends in the tanks.
And as I showed in an earlier essay, the NIST found that the average annual temperature of fuel stored in those underground tanks was 64.7 degrees:
The fuel temperature data was gathered by the National Institute of Standards and Technology from storage tanks at 1,000 gas stations and truck stops in 48 states and the District of Columbia during a period from 2002 to 2004.
The NIST data revealed that the average temperature of fuel across the country and year-round was 64.7 degrees Fahrenheit — almost 5 degrees higher than the government standard of 60 degrees.
So, how many gallons does the "ripoff" then amount to? The OIDA site discusses that in their next myth:
MYTH: Temperature only causes tablespoons of difference in amount of fuel delivered.
FACT: A 25-gallon fill-up of 75 degree F gasoline equates to a loss of nearly one quart. The same fill-up at 90 degrees F equates to nearly a half gallon.
But we aren't filling up with gasoline at 75 degrees, are we? The NIST investigation - which started this whole thing - established that. And again, as I showed in the previous essay, the difference between gasoline at 60 degrees F and gasoline at 64.7 degrees F is 0.27%. Therefore, in a 25 gallon fill-up, the difference is 8.6 ounces (17.3 tablespoons). But suggesting that people are regularly getting gasoline at 75 degrees or even 90 degrees is just outright misinformation.
MYTH: 90 percent of fuel retailers are small “mom and pop” operations.
FACT: Several large oil production companies and refiners own 25 percent of the stations that sell their brand fuel.
You have to love this one. The myth is that 90 percent of fuel retailers are small, but the reality is that 25 percent are NOT SMALL. Or, according to them, 75 percent are small, but contrasting 90 to 75 must not have felt impressive enough. But they are wrong anyway, according to a 2007 report:
Who Sells Gas – and For What – May Surprise You
In reality, less than 3 percent of the more than 112,000 convenience stores selling gasoline are owned and operated by major oil companies.
Of course not all gas is sold at convenience stores, so we have to account for the stand-alone gas stations to get the total that are owned by Big Oil. According to the extensive report by the NACS, found here:
It’s estimated that less than 5 percent of the approximately 168,000 retail gasoline facilities in the United States are owned and operated by the major oil companies.
So much for the idea of sticking it to Big Oil. I understand that this is why this issue has taken off, but that's not who is going to get stuck.
MYTH: The cost to retro-fit the pumps will far outweigh the benefit to the consumers.
FACT: The one-time cost to retro-fit retail pumps is very close to the extra amount consumers already pay annually for hot fuel.
Yet that doesn't contradict the "myth", does it? That doesn't mean that after the retro-fit, consumers won't be paying even more. And based on the estimates that I have seen, to put temperature compensation on all of these pumps will cost in the range of $6 billion to $12 billion ($3,000-$4,000 per pump times 2-3 million pumps). So even if we accepted the premise of $2 billion extra from consumers each year, I have a hard time accepting that this is "very close" to the cost of the new equipment.
And they close with one supported by nothing by a great big dose of wishful thinking:
MYTH: The cost of retro-fitting the pumps will raise the price of fuel for all consumers.
FACT: Consumers have borne the burden of hot fuel sales for decades. Once the problem is fixed they will reap the benefits for future decades.
Sadly, another story at the OIDA website said that that on July 11, 2007 the National Conference on Weights and Measures failed to approve a measure to approve guidelines for states, should they ever decide that they wanted temperature compensation. Again, they couldn't even pass a measure for a non-binding guideline. Those voting against must be in the pockets of Big Oil.
Stuff like this really drives me crazy. A waste of time for the parties who are supposed to reap benefits, an annoyance for people trying to run service stations, an issue that allows politicians to pander, while the real beneficiaries are the attorneys.
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Thanks for you post.
I think your reliance on the average makes a little sense for estimating the amount of "over charging" but there are some inconsistencies in your other arguments. You are saying that storage tanks keep the temperature uniform but then say that they retain the delivered temperature. The latter is more likely to be true, as you say, for the high volume sellers. The delivered temperature can pretty easily be the air temperature and so selling gas at 90 F can happen whereas you suggest it can't.
I agree with you that compensation is a waste of time, but the size of a lawsuit could end up being large which makes this attractive as a class-action. One would hope that a warning lable will be sufficient remedy, or better, that physics be a required subject in schools so people can just realize that this has to happen.
The delivered temperature can pretty easily be the air temperature and so selling gas at 90 F can happen whereas you suggest it can't.
There are very good reasons not to deliver gasoline at 90 F. That would make for a blending nightmare as butane flashed off.
But I agree that you could deliver gasoline at 90. But when the NIST did their sampling, that's not what they found. I have heard that the average in California was higher than for the rest of the country, but that the sample size was very small. But I have never been able to dig up the raw data. That would be quite interesting.
Hi Robert,
I think the raw data is needed to make a better estimate. One want's to look at the temperature together with the selling price to see if prices are elevated together with temperature. If not, then the effect will average out at the level you cite, but if so, then the effect will end up higher. One also wants to look at the skew since if all the below average numbers are closely clustered but the above average numbers have a large range you can get oportunities for manipulation as well.
How is the delivered temp of the gasoline going to reach the air temperature??? It's delivered in huge tanker trucks, and often IN THE MIDDLE OF THE NIGHT! Even if the tanker truck has been sitting in 100 degree sunshine for a few hours I sincerely doubt the temp of the gasoline inside the truck would rise by more than a few degrees. And the temps from wherever it came from before it hit the tanker truck are certainly stable due to the volume of whatever it's pumped from.
I still say it's trivial to find out the truth. Pump some gas into something when it's 100 degrees outside and stick a thermometer in the liquid. Do the same thing when it's zero outside. Repeat in a few different locations. Then we'd know.
jbunt
I retired from a large petroleum marketer. During a year, we averaged about $1 million a month in profits from hot gas. Zero during the winter and more during the summer to average $12 million year. We are located in the Southwest. When it is 100 degrees out, the fuel coming out of the refinery that we load is very hot. So, in a typically good transaction, our truck will load and pay for 7,200 temperature corrected gallons gallons and the actual physical quantity will be 7,500 gallons. That is 300 free gallons, and since taxes are paid at the rack (started about 10 years ago to prevent tax cheating), no federal or state taxes on the 300 gallons. The retail pump price charges both for the product and for the taxes, which taxes do not have to be paid because they were already paid at the rack. So at $3 gallon, we make an additional $900 or $.125 cents/gallon "extra" on each of the 7,200 gallons. And, most of the reason is that the 75 degree gallons, which are put in the underground tank, hold much of that temperature until sold. At a large volume station, it is likely that the fuel is sold within 24 hours.
Do you know the temperature that the fuel comes out of a refinery? I do not know such things, but I think that the temperature that we get with our purchase varies by the ambient temperature of the air, e.g., a 100 degree day, and the amount of time between the refinery run and our purchase. While working, I never did a study, but I think that the anecdotal comments were that fuel coming from a refiner's racks could be hotter than fuel coming from pipeline terminal racks.
So, in a typically good transaction, our truck will load and pay for 7,200 temperature corrected gallons gallons and the actual physical quantity will be 7,500 gallons.
That's a difference of 4%, meaning you would have been getting fuel at over 120 degrees F. I won't say your recollection is incorrect, but that would have been a very, very odd situation. A blender who is making gasoline at 120 degrees is losing much more by the inability to put butane in there than you would be gaining with hot gas. But the NIST study certainly didn't find any temperatures in that neighborhood.
Wow. Maybe you ought to write us an article.
I just checked the temp in the tanks at the refinery where I work. Temp is 87F in one 84F in the other. These tanks are going to the onsite rack. This is a "Southwest refinery".
Several points to be added (for this part of the world):
Gasoline is transported by pipeline to bulk storage terminals located near the pipelines. We have several locations in NC for the collection of bulk storage terminals (Selma, Wilmington, Greensboro, and Charlotte). The gasoline is stored in large internal floating roof tanks (and some external floaters that have been converted by coverage with a dome). Since most of those tanks are white or white and silver (except some Hess tanks...they like that distinctive green color). Local meteorological conditions, size of the tanks and turnover times affect the equilibrium temperature of the product in bulk storage. API has a fair amount of data for these characteristics. When I worked with EXXON a few years back, we kept daily records on gsaoline storage tank and loading rack conditions for each of the terminals.
From storage, they go through loading racks into multi-section tanker trucks (nominally 8,000 gallons per load in the standard oval shaped tank to designate a flammable liquid in transport). Depending upon time of transport, ambient temperature and the quantity of fuel in the truck as it runs its deliveries, the temperature of the gasoline dispensed into double-walled FRP tanks could change slightly. Only the stations at the end of a delivery run, with partial loads remaining in the tanker would be expected see the greatest change in gasoline temperature as the gasoline is transported from the bulk terminals.
As noted, there are a number of factors that influence what temperature change and how fast the gasoline in the UST comes to equilibrium with the ground temperature.
Finally, although the pump and the pump meter may start as "hot" or "cold" depending upon ambient conditions, it quickly equilibrates to the bulk temperature of the gasoline in the UST (unless, of course, your pumping rate is about a cc per minute, in which case it will be near the ambient temperature surrounding the meter and the pump. But then who wants to spend all day filling their gas tank in this manner). The rate of heat exchange from ambient conditions is not enough to "heat up or "cool down" the gasoline going through the metering system to make a difference. Above ground tanks for service stations(relatively rare except in DoD) can be a different matter.
Except for the very initial flow out of the pump and meter, this issue of hot or cold gasoline at the pump is a non-issue.
Why not? As an overall nationwide picture, I can't think of a reason why it wouldn't be a good method, but maybe you have.
Locally, it could make a big difference. That is someone in the desert southwest could be getting hosed while someone in Alaska might benefit. At least in theory.
Jim,
Gasoline prices tend to track air temperature these days, so with higher prices when the gas is warmer you get more of an effect. The thing that is a little furstrating about the average is that it is not reported with a standard deviation so it is not possible to back out the range of temperatures measured. The main point of the original article, that prices will compensate if fuel temperature is taken into account is a good one. I think that some of these suits will succeed and then we'll either see temperature compensation or disclosure and that will be the end of it.
I realise you are discussing 'hot' gas, but interestingly, in Canada, where the oil companies were on the wrong end of that 1 cent per gallon, 'cold' gas was a big enough issue that temperature compensation became customary in how fuel was handled in Canada -
'Five years ago major Canadian oil companies, with the approval of Measurement Canada, accepted a system devised by U.S. oil refiners for their upstream operations and set a retail industry standard of temperature compensation at 15 degrees Celsius. As such, most retailers in Canada now have temperature compensated equipment that adjusts to that standard. Unfortunately for consumers, the average temperature in Canada is 6 degrees Celsius. Thus, a wrong standard was imposed at the retail level and refiners are the net beneficiaries.
It is a fact that 15 degrees Celsius is the American Petroleum Institute's accepted standard at the time of product transfer between refinery pipelines, ships and terminals. However, in all northern US states where the average ambient temperature is below that mark, industry practice, or law, excludes the sale of petroleum on a corrected basis into tank trucks or retail. In most states where the average temperature is above 15 degrees Celsius, retailers sell product on an ambient basis. In either case, the method of sale at retail benefits the consumer while in Canada the opposite is true.'
http://www.cbc.ca/consumers/market/files/cars/gasprice/committee.html
Nice to see that Americans are finally getting 'hosed' like Canadians.
'By converting to 15 degrees Celsius, Ontario consumers, for example, over several months of the year, receive less gasoline for the same dollar spent than if they were to purchase product at ambient temperature. Through the use of temperature correction devices in tank and retail pumps, the Canadian major refiner-marketer has added in excess of $100 million a year to gross margins in the province alone.
That figure represents an absolute transfer of wealth from the consumer to the oil companies when compared to the situation prior to the implementation of costly ATC devices. As it now stands, purchasing gasoline that has been temperature compensated at 15 degrees Celsius is heavily penalizing consumers throughout Canada.
The Committee recommends that either Automatic Temperature Compensation be removed from use in Canada or, to avoid the losses incurred to install expensive ATC devices, that the 15 degrees Celsius mark be lowered to the average regional temperature in which product is sold at the tank and retail level.'
So considering that the equipment is so expensive, I'm sure you will detail why Canadian gasoline retailers should no longer be burdened with such overhead - or at least that in Canada and the northern America states, another standard than 15° C should be used.
Being cynical, though, I'm pretty sure we won't see that article. It is likely to be a bit too big picture, instead of quibbling over gasoline at 60 degrees F and gasoline at 64.7 degrees F. Though it seems as if in Canada, the free market works - the equipment was adopted voluntarily, while in the U.S., it is something which would make gasoline more expensive 'as every retailer tries to recoup the cost of temperature compensation equipment.' I guess in Canada, the equation worked out. The invisible hand at work, though pickpocketing sounds so uncouth.
However, in all credit, the amount of time wasted on this topic is already hard to imagine - I can't even imagine how European style fuel taxes could be introduced in a system where .25 cent a liter is thought of as a big deal. Germany's fuel prices increased 3% overnight, when the VAT was raised - and this issue is about .3%, it seems.
I realise you are discussing 'hot' gas, but interestingly, in Canada, where the oil companies were on the wrong end of that 1 cent per gallon, 'cold' gas was a big enough issue that temperature compensation became customary in how fuel was handled in Canada -
Perhaps in a different time, when oil companies owned a lot more of their own outlets, and when supply wasn't severely constrained, it may have made sense for an oil company to argue that such a system would be beneficial to them in very cold climates. Today, oil companies own very few stations, and supplies are tight. Under these circumstances, 1). The consumer won't benefit at all, because if tomorrow's gallon is definted to be slightly more than today's gallon, price is simply going to rise to compensate; and 2). It doesn't affect Big Oil anyway. They have very little exposure here.
Personally, I think retailers wasted their money in Canada. But, if some retailers did adopt the system, that would give them some advantage against other retailers without the system (in cold weather). So it may have had less to do with extracting more money from consumers than it was an arms race against other retailers who were able to get the same price for a slightly smaller quantity of fuel. In the U.S., the exact opposite is true. Anyone adopting this system is going to be at an immediate disadvantage to retailers who do not - as long as the temperate is above the standard temperature.
Your points are taken, and of course, Canada is not the U.S.
From the article, which was from 1998, in Canadian dollars, discussing Ontario alone -
'By converting to 15 degrees Celsius, Ontario consumers, for example, over several months of the year, receive less gasoline for the same dollar spent than if they were to purchase product at ambient temperature. Through the use of temperature correction devices in tank and retail pumps, the Canadian major refiner-marketer has added in excess of $100 million a year to gross margins in the province alone.'
100 million Canadian dollars, per year, in Ontario alone, is an amount of money which means that the investment in temperature compensation equipment has been worth a cool billion dollars over ten years - I think that the investment paid off for someone, and not merely the equipment manufacturers. It was not a waste of money by any stretch of my imagination. Even by ExxonMobil's exalted standards of money-making, it was probably worth a few campaign contributions and a couple of legislative astro-turf campaigns about how gas station owners were being strangled due to the harsh fact that Canada is cold, the poor owners being unfairly taken advantage of by everyone that bought a gallon of gas in the wintertime.
From the link you posted above:
That sounds about right. But, as I said if your competitor has installed equipment that allows him to sell a slightly lower volume at the same price, you are probably going to have to follow suit.
And yet, strangely, according to the article (not the report - which I hadn't noticed as a PDF link), 'The recommendations contained in this excerpt were rejected by Industry Minister John Manley.'
The recommendations -
'The Committee recommends that either Automatic Temperature Compensation be removed from use in Canada or, to avoid the losses incurred to install expensive ATC devices, that the 15 degrees Celsius mark be lowered to the average regional temperature in which product is sold at the tank and retail level.'
Strangely, the result in Canada seems to be that the government forced the retailers to make an additional billion dollars over 10 years - and yet, not a peep from the oil industry screaming about such a heavy regulatory burden being forced on them.
I grew up near Washington, D.C., and though I respect facts, it is a stunning lesson when growing older to realize what an increasingly insignificant role facts play in such contexts. Or to put it differently - 100 million dollars in a year in one province is the sort of fact that trumps others, especially with some of that money flowing into the correct hands - for example, I'm sure that Industry Minister John Manley found gainful employment after leaving government.
Oh wait -
'Shortly after Manley announced his retirement from federal politics, Dalton McGuinty, Premier of Ontario and close friend of Manley, appointed him to chair a royal commission on the energy system of Ontario in the wake of the eastern North American blackout of 2003.
On May 26, 2004, Manley was named to the Board of Directors of telecommunications firm Nortel Networks. On January 27, 2005, he was elected to the Board of Directors of the Canadian Imperial Bank of Commerce. He is also chair of the Independent Task Force on the Future of North America, a project of the U.S. Council on Foreign Relations. In March 2005, the Task Force released a report that advocated a North American union, an economic union between Canada, Mexico and the United States which would resemble the European Union.'
http://en.wikipedia.org/wiki/John_Manley_(politician)#Post-political_career
I'm sure no one would question his commitment to the average citizen of Canada, especially if that average citizen just happened to be a fellow board member of Nortel, or the Canadian Imperial Bank of Commerce.
The simple fact remains, that in Canada, such systems were installed, and oil retailers profited at the gross margin, and that in much of the U.S., installing such systems will cause oil retailers to lose revenue, with the added burden of the cost of the system themselves.
It won't change the amount of oil being pumped from the ground, no question.
And such discussions add light to why in a German context, peak oil in terms of prices is not much of a theme. Most Germans expect oil companies to profit as much as possible, in part because most Germans would do the same thing if they were running an oil company - cynicism and no illusions about human nature are often hard to tell apart.
Your broad points are not actually in dispute in my eyes - the retail gasoline pricing/volume system in the U.S. as it exists today does not really require any change. As for motivation - well, it is a business, so it is all about the money. Call me cynical.
Strangely, the result in Canada seems to be that the government forced the retailers to make an additional billion dollars over 10 years
Key point: "seems to be." Prices aren't set in a vacuum. If I only sell you 3/4 a gallon and call it a gallon, I am not going to profit 1/4 a gallon. Price is still going to respond to supply and demand. It doesn't matter. I can call a liter a gallon. The amount you pay at the pump isn't going to make any difference. That's what these analyses can't seem to get.
Also, as pointed out, even if you accept the premise, we are talking about a penny a gallon across the country. And the profit margins for retailers - which are pretty darn slim - already have that factored in.
I think we just see things somewhat differently - in the case of 'cold' gas, the amount sold as a gallon was more than a gallon during colder periods, which meant that after the equipment was installed, a retailer was able to sell 'more' than they had previously, if not in physical quantity, then in terms of money received.
You are welcome to believe that the market then lowered it prices to adjust to this fact, and everything remained unchanged otherwise, apart from recovering the cost of the installed equipment. I'm cynical. There is a reason for weights and measures department, for example, one empirically demonstrated over generations. Though possibly, at some point, we may hear about that unnecessary regulatory burden, since the cost of ensuring that merchants actually deliver the amount they claim to sell is an overhead which can be removed for the benefit of the customers.
And yet, it is never the customers clamoring for higher prices for the merchant's profit, it is the merchant. The customer is always clamoring for lower prices at the merchant's cost. In Canada, it seems as if the merchant benefited by installing such equipment - in the U.S., the customer would seem to benefit (trivially at best). Strangely, in Canada such equipment seems to have been installed, somewhat voluntarily, by retailers. In America, it is being resisted by the retailers.
None of this is a surprise, and I notice neither of us needs to discuss the facts, as they apply equally with 'cold' gas as 'hot.' Except for cold gas, the equipment seems to have been installed at the behest of the oil retailing industry, after appropriate regulatory changes to use 15° C as the Canadian average (which appears inaccurate in terms of Canadian temperatures), as there does not seem to have been a groundswell of populist sentiment from Canadian gasoline customers to pay more for gasoline.
No surprise - everyone has interests they feel worth protecting, and in which facts are used to support their interests. Such tensions are part of the marketplace, after all.
Robert,
Taking the average temperature nationwide is a horrible misuse of the statistics. The in-ground temperature range is probably pretty wide over that average depending on whether you are in Montana or Arizona and whether it is January or August. In any event, I'd really like to see seasonal temperature data for all 50 states before I accept your generalizations.
In my personal opinion, this should be a state issue. If a given state sees that its temperature range is sufficiently volatile to cause losses that it considers harm, then they can choose to implement the tech to counter that. And for states that do not, they can avoid that cost.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Taking the average temperature nationwide is a horrible misuse of the statistics.
The original article used the average to calculate the nationwide losses. Otherwise, I would agree. And I would also agree about the state issue. For instance, if it is really true that California consumers will benefit, it is also true that Michigan consumers will lose. Are they willing to give up some money so Californians can gain more?
Hawaii has already taken matters into their own hands. They actually define a gallon of gas as being a different size than the rest of the nation uses, in order to compensate for the warmer weather in Hawaii.
And it seems to be working, as Hawaii's gas prices are among the lowest in the nation. :-)
Hawaii's prices for EVERYTHING are the highest in the nation, and always have been. It's what happens when you have to ship (or fly) everything there.
Of course that's true, but do you honestly believe that if a gallon was defined to be 0.75 gallon or 1.5 gallons, it would make one bit of difference in how much you pay for gasoline each year?
I think it might.
That is, I think it's possible gas prices in Hawaii would be even higher than they are now.
(Though, amazing, Hawaii's gas prices were actually cheaper than those in the midwest for awhile this spring. Weirdness...)
return to the world of reality. I'm in favor of complete sunshine so in favor of temp correction just on principle, but if you believe retailers don't already understand this and factor it into their p/l machinations, you are living on a cloud.
On my last trip to Honolulu, I stopped at CostCo (partly to fill up on gas & partly to get some new boogie boards to use at the beach) and I found certain items to be cheaper than on the mainland i.e., some of the exact same items one sees at CostCo in a Chicago or Dallas were cheaper in Honolulu. This puzzled me until I noticed that these items all had one thing in common -- they were "made in China". Lower shipping costs to Honolulu than Chicago or Dallas I guess.
For other items, I found the price spread between Hawai'i and the mainland to be very large, unless you're shopping at AAFES (or the Navy version, which is quite nice by the way), in which case the difference is just large (no "very").
It's not just shipping. It's also taxes. Hawaii has a rather unique sales tax. EVERYTHING is taxed, at every level. The sales tax is a seemingly modest 4%, but it's on everything. Food, clothes, medicine, etc. Services, commissions, wholesale sales, etc., are all taxed. Dunno how accurate it is, but someone calculated that it's equivalent to an 11% sales tax, because of the way it is applied.
The prices I noticed were pre-tax and all the items subject to the full tax rate in all states. The magnitude of the price differentials for the "Chinese made" goods were in the 20-25% range. Not all Asian made goods were noticably cheaper, just some.
Hawai'i (like California) has higher than average state income taxes. Offsetting this, though, are the extremely low real estate taxes (also like California for longer-term residents). I have seen a number of homes on O'ahu in the 1+ million price range that pay only $400+ dollars a month in RE taxes. (Warren Buffett only pays around $2k/yr for his million dollar home in Cali.) In Dallas, you'll pay $2,000+ per month on such a home in addition to paying high sales taxes (9.5% at its worst), but the absence of a state income tax and the exclusion of certain goods from the sales tax provides a counterbalance.
Hawai'i, like all states, needs to get its funds from somewhere, but their current system rewards wealthy absentee property owners and part-time residents while it works to inflate home values and make it hard for the locals to own housing they do not inherit (which leads some to live in tents near the beach).
So, if you're wealthy, own a home there, and can declare/keep residency elsewhere, Hawai'i becomes more affordable than one might first expect. (I believe Bush 41 kept his Texas residency and saved thousands in taxes by staying only a few nights in a hotel/apartment each year. I'm confident a number of those who own homes in Hawai'i do something similar.)
that 11% is a load of bull--t. If you have a tax ID number and act as a middleman, you don't pay 4% excise tax but 0.5% instead. There's no way goods/services pass through enough hands to get to 11%.
Most services are direct. So 4.16% gets collected (you are allowed to collect the tax on the tax). Most goods that are imported are sold by the big retailer that brought them in. So again, no giant snowballing effect.
We do have anti tax loons (Lowell Kalapa is #1) that try to argue these multipliers but anyone with sense knows its a lie coming from a bought and paid for business shill.
And PS, freight costs on imports while not trivial, really don't make our goods go up that much. You can cram a hell of a lot of stuff in a 40 ft container which moves over for about $5000. Our gasoline is high because we have little competition. When Costco started retailing here, our prices went down 25 cts relative to Oahu. The difference was excessive retail margins.
I first learned about the issue of temperature of gas at point of sale back in early 50s when my father was involved in Bureau of Standards, since renamed NIST. The issue then was not a point of sale to the end user, but measurement at the time of delivery to the local retailer. It was claimed that a distributor, or refiner could make or break individual retailers by the time of day of the delivery to that individual retailer. The delivery truck was filled with cool gas early in the morning, and then went on its rounds. As the day progressed the gas in tank truck did warm up. The last retailer on the list got significantly less gas for his dollar than the first. And the retailers were all competing in the same market. I think this makes sense as a technical and market economics effect. Whether distributors have a reason to deliberately reorder deliveries in order to hurt certain of their custombers is something that I don't know.
So there is a history of worry about a situation that is somewhat like what is being worried about now. But the now worry is goofy. The then worry might have been goofy too, or it might have been addressed by putting temperature compensation into the flow meters on the delivery trucks. I don't know which. To have put temperature compensation on the delivery trucks would have been far less expensive than temperature compensation on the retail gas pumps --- there are, and always have been, far fewer delivery trucks than gas pumps!
How about a simpler "solution": stations are required to install a thermometer in each tank; the thermometer relays the temperature to a large LED display visible to all.
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I had a chem teacher lecture us on this as though it was a big deal. I couldn't believe it, so I did a couple of calculations while she was lecturing. I figured out that a person with a car that gets about 20mpg would pay about $60 per year because of the expansion of gasoline. That's hardly a problem. This was when gas was $3 per gallon too, so it is still accurate.
Now, if the person were driving semi truck, things are different.
and of course you assume the retailer won't hold his margin constant even if we temp correct.
That's the bottom line. Retailers will adjust. I'm in favor of accuracy but there are no free lunches. We'll pay for the equipment and probably not save much if anything if we temp correct.