The AG also said that the stations were engaging in false advertising by only listing the lower cash prices on signs, leading to nasty surprises for consumers once they parked at the pump.

“With drivers hitting the road this weekend and gas prices through the roof, the last thing New York City drivers need are gas stations hitting them with exorbitant prices for paying with a credit card,” said Attorney General Cuomo. “Drivers across New York City need to be on the guard for gas stations that engage in deceptive practices to squeeze every last dollar out of their customers. Our investigation revealed that New York City is rife with gas stations that engage in deceptive practices where they display one price as a way to lure customers - and then charge them more at the pump."

Consumers who see gas stations prominently advertising the cash-only price on primary signage and then indicating at the pump that credit card customers will be charged more are urged to contact the Attorney General’s Consumer Helpline at 1-800-996-4630.

For more information about how credit card surcharges work, click here. Remember, your state laws will vary.

ATTORNEY GENERAL CUOMO ISSUES CONSUMER ALERT FOR NYC DRIVERS AFTER INVESTIGATION REVEALS NEARLY 25% OF NYC AREA GAS STATIONS INSPECTED ENGAGED IN DECEPTIVE PRACTICES [NY AG]
(Photo: whatatravisty )

The basic facts are correct, but the advice is not. Gasoline does expand and contract a little depending on its temperature. When gasoline rises from 60 to 75 degrees F, for instance, it increases in volume by 1 percent while the energy content remains the same.

But filling stations typically store their gasoline in underground tanks, where the temperature variation during the day is much less than in the air above. The result is that the temperature of the gasoline coming out of the fuel nozzle varies very little, if at all, during any 24-hour stretch at any particular station.

CR did some temperature testing at their auto test facility where they have an underground fuel tank similar to the ones that gas stations use. Here's what they found:

While the air temperature between filling varied by up to 12 degrees, the fuel in our underground tank stayed at a steady 62 degrees F. As a result, we found that after the first few gallons were pumped, the fuel temperature coming out of the nozzle varied very little between morning and afternoon.

Like a hose sitting in the sun, gasoline that was sitting in a pump and not being dispensed tended to warm up— but those few gallons didn't make much of a difference. Ultimately, CR found that there was no reason to pump in the morning.

Even with the temperature swings we saw in the first few gallons pumped at our facility, we didn’t see a big penalty for the consumer. A 15-degree difference, for example, would result in a one-percent gain in volume. Or, just a few cents difference on the first gallons pumped—not enough to change your schedule or routine in chasing costs, especially if it might increase your fuel consumption in the pursuit.

You can get the rest of the details of their testing by clicking here.

Save on gas with morning fill-ups? Don’t bet on it [CR]
(Photo: Listener42 )

I pulled out of the lot, turned left, and I wasn't more than 200 yards away when a cop comes up behind me, lights flashing. I knew I couldn't have been speeding so I was genuinely confused. He said the woman at the United Dairy Farmers said I drove off without paying for gas.

Here's Chris' full story:

I had an interesting experience on Friday and a life lesson I think is worth passing onto other readers. On Friday I stopped at a United Dairy Farmers (local Cincinnati convenience store/ice cream parlor) to fill up while gas is relatively cheap. I pulled up to the pump, swiped my card, filled up, and paused before printing the receipt. Usually those things just end up wadding up in my pocket or under the seats of the car, but what the hell, I hit yes anyway. I then went inside to get a soft drink.

"Anything else?" the cashier asked. I said no, paid in change, and went back to my car. I pulled out of the lot, turned left, and I wasn't more than 200 yards away when a cop comes up behind me, lights flashing. I knew I couldn't have been speeding so I was genuinely confused. He said the woman at the United Dairy Farmers said I drove off without paying for gas. I said that was incorrect, and he said "She said it was a silver car, and she pointed at yours." I do drive a silver car, but I had paid for gas, and wait! I told the officer I had my receipt, and he wrote down the details: Amount, pump number, last 4 of my credit card, and the time. I also pulled out the credit card I paid with and my license, just to verify everything was on the up and up. He was cool about it, apologized, and I was on my way.

Lesson here is to always print that receipt out. I rarely check it against my statements now that I don't fill up as often. But without that 3x1 strip of paper I would have had a totally different story to tell. Needless to say I won't be taking my business to United Dairy Farmers anymore - being falsely accused of theft is a dealbreaker.

(Photo: Getty)

Activists Keep the Faith, if Not Their Money [Washington Post] (Thanks to ejangles!)

Normally, you have to swipe your Costco Card or the American Express Costco TrueEarnings card in order to authenticate in their gas station systems. It appears that you can simply use any American Express card in the authentication phase because the American Express Costco TrueEarnings card is just an AMEX with a Costco bar code.

The trick definitely works in Maryland, but not in New Jersey or Oregon. Would you fill your tank at Costco, or are the ethical considerations enough to keep you at your local station?

Buy Costco Gas without Costco Membership [Blueprint for Financial Prosperity]



(Photo: beebo wallace)

New Jersey has 3,142 gas stations, according to the Star Ledger. Inspectors checked 1,023 of them, and issued citations to 350 owners. New Jersey's Attorney General encouraged consumers to report any violations they come across. A larger version of the map can be viewed here.
(Thanks to Ryan!)

The article says,

His complaints target the so-called interchange fee — a percentage of the sale price paid to credit card companies on every transaction. The percentage is fixed — usually at just under 2 percent — but the dollar amount of the fee rises with the price of the goods or services.

As gas tops $4 a gallon, that pushes fees toward 10 cents a gallon. Now stations, which typically mark up gasoline by 11 to 12 cents a gallon, are seeing profits shrink or even reverse.

In a good month, Randolph's small operation would yield a $60 profit on gasoline sales. But that's been buried as soaring prices forced the station to pay about $500 a month in interchange fees.

"At these prices, people aren't making any money," said Jeff Lenard, spokesman for the Alexandria, Va.-based National Association of Convenience Stores. "It's brutal."

Many gas stations across the country have dealt with this issue by offering discounts on cash transactions which is not a perfect solution explains the spokesman for the National Association of convenience stores, "The problem with cash discounts is, if people don't have the cash or don't want to spend the cash, you've inconvenienced them."

Another avenue being explored by some gas station owners is finding less expensive credit card companies. Tom's Convenience stores in Pennsylvania has started using a new credit card company called Revolution which charges smaller interchange fees. Customers who use the card get an automatic 10 cent discount.

The National Retail Federation says that the recent surge in gas prices has focused attention on to what they believe is an underlying problem with credit card fees. They say that even though the price of gas has gone up, the cost of processing credit and debit cards stays the same. "We have always contended that it doesn't cost Visa and MasterCard any more to process a $1,000 transaction than it does a $100 transaction," said J. Craig Shearman, vice president of government affairs at the retail federation.

Currently, there is pending legislation in Congress which would allow merchants to bargain collectively with the credit card companies. Other legislation focuses on requiring credit card companies to explain how they calculate their fees. Unfortunately, approving and enacting such changes will probably take some time. So until there is any change in the structure of interchange fees, it seems that customers and owners will continue to experience pain at the pump.

Some gas stations banning credit cards [AP]
(Photo: Getty)

Now Yechial wants to know, are BP stations simply charging more to negate the 5% rebate on the Chase BP card, or are they really dealing with higher fees on their end? This L.A. Times article published last week says it's the second reason—which means any rebate your credit card promises you on gas purchases is going to be inherently less valuable so long as expenses keep rising for station owners.

From the L.A. Times article:

Gas retailers are being hurt by several forces, including lower sales, higher credit card fees and fuel expenses, that are directly tied to this year's dramatic rise in the price of oil.

In Van der Valk's case, fuel sales have fallen as much as 10% as customers cut back on driving. The lost volume means fewer customers flow through the convenience store to buy coffee, sodas and other money-making items.

With each price increase, more people use credit cards to buy gas, taking a bigger bite out of station profits. A dealer typically pays a 10-cent transaction fee plus 2% to 2.5% of the total fuel sale for each customer.

Yechial writes, "I have told my wife to no longer use BP gas stations, and we are canceling the BP credit card." It's probably not the station owner's fault he's having to charge more, but we agree that if the only reason you got the BP card was for the gas purchase rebate, you got a bum deal. (But so did the station owner.)

"Soaring costs are squeezing gas station owners too" [Los Angeles Times]
(Photo: Yogi)

Reuters says:

Service stations have struggled, even with soaring gasoline prices, because they have not been able to push the high cost of crude oil on to customers. According to federal data, gasoline prices are up about 31 percent over the last year.

Exxon Plans to Sell Its Gas Stations [NYT]
(Photo: whatatravisty )

To deal with pumps that don't have enough numbers on them to go above $3.99 per gallon, some gas station owners are selling gas by the half-gallon. Another problem is that pumps with dials on them are wearing out faster as the dials have to spin faster to keep up as the dollars per second coming out of the pump is greater. There is a seventeen-week backlog for replacement pumps that let the price show above $3.99.

Old Meters Mean Double the Price at the Pump [NYT]
(Photo: Morton Fox)

As many as 8,500 of the nation’s 170,000 service stations have old-style meters that need to be fixed — about 17,000 individual pumps, said Bob Renkes, executive vice president of the Petroleum Equipment Institute of Tulsa, Okla.

At Chip Colville’s Chevron station in this eastern Washington town, where men in the family have pumped gas since 1919, three stubby, gray pumps were installed when gas was less than $1 a gallon. They top out at $3.999, only 30 cents above the price of regular gas at Colville’s station.

"In small towns, where you don’t have the volume, there’s no way you can afford to pay for the replacements for these old pumps," Colville said. "It’s just not economically feasible."

The pumps will have to be retrofitted with new meters that go up to $4.99, but experts say that this puts a lot of strain on the old pumps.

Old Gas Pumps Can't Handle Ever-Rising Prices [Boston Herald]
(Photo: AP)

The check valve's job is to sync the gas flow of gas with the start of the price meter. A faulty check valve might produce a 2-6 second delay before the gas starts pumping, an error in favor of the gas station. Conversely, a faulty check valve could also start pumping a few seconds before the meter starts, an error that benefits the customer. Unfortunately, check valves are difficult to diagnose and may often work sporadically. A spokeswoman for New York's weights and measures office said, "It's very difficult to find it unless you are there every day several times a day."

Making matters worse, many pumps are inspected too infrequently. The article says, "A New York Comptroller's Office audit in 2000 found many municipalities statewide failed to inspect their pumps once a year as required and that meters were corrected during testing, which could mask overcharging. Four years later, a follow-up audit found only partial resolution, partly because of too little staffing." State and local regulators doubt that most customers report gas pump discrepancies, and even if they do, it's likely that they won't get fixed.

So what can you do about faulty gas pumps? Try to keep track of how much gas your pump is actually pumping. If you see the price meter start several seconds before the gas flows, your pump may have a faulty check valve. Additionally, if you've put 11 gallons into your 10 gallon tank, it's obvious that something is amiss. Report any discrepancies to the gas station. Some gas stations are authorized to give recompense if the discrepancy is within $5.00. Also look for a phone number on the side of the pump which you can use to report any problems. Don't forget about your local Department of Weights and Measures since recent history has shown some positive results from their involvement.

Common glitch at pump adds to gas costs, also cheats station [AP]
(Photo: damageinc86)

"The customers came in and evidently he took down their credit card number and expiration date," said Jim McDonald, manager of the gas station. "He was working with another employee. When the other employee left at 9 p.m. he bought himself three prepaid debit cards and since he had the credit card number and expiration date, he could manually enter it."

McDonald said Saumur bought one $100 card, and two $50 cards.

"Gas Attendant Accused Of ID Theft" [MSNBC]
(Photo: Getty)

"It looks like the victims were gassing up here and using the outside pump terminals, and their credit card information was compromised," El Monte police Detective Brian Glick said.

Police don't believe it was an inside job but that the fraud artists picked the station in the 4300 block North Santa Anita Avenue because of its high customer volume.

Fraudulent withdrawals, ranging from $400 to $1,500 per customer, were made in Las Vegas, Palms Springs and New York, police said.

ID Theft Investigated At El Monte Gas Station [KNBC]
(Photo:KNBC)

The Sun-Sentinel analyzed state inspection reports from 2004 to 2006. The analysis found 580 of more than 2,500 stations in South Florida had at least one pump dispensing more gas than customers paid to purchase, while 477 provided less fuel than they should.

"If you go to the grocery store and buy a gallon of milk, you expect a gallon of milk," said Jason Toews, co-founder of Gasbuddy.com, a consumer advocacy site that tracks gas prices. "The same goes for gasoline."

It's unclear if Florida's pump failure rate is higher or lower than in other states. In 2003, a national survey by the National Conference on Weights and Measures, found a 6 percent failure rate on gas dispensers tested in 2002. South Florida's failure rate in recent years mirrors the nation.

34 percent of area gas stations fail pump tests in last three years [South Florida Sun-Sentinel]
(AP Photo/Matt Rourke)

Steve, our friend over at the Arizona Department of Weights and Measures sent us this photo of a "skimmer."

Arizona's very first credit card skimmer was found at a gas station on May 30th, so the Arizona Department of Weights and Measures is taking steps to ensure that other skimmers that may have been installed are located.

How can you, as a consumer, tell if a skimmer has been installed before you pay? That's the trouble. You can't. The device is tiny and has to be installed inside the credit card machine. It's a troubling problem. How are the scammers gaining access to the gas station credit card machines? How can they be stopped?

The best thing you can do is check your credit card statements for fraudulent activity. Never assume that just because the card is in your wallet, it's safe. —MEGHANN MARCO

(Photo: Arizona Department of Weights And Measures)

As gas costs rise to $4 a gallon and oil companies earn around $100 billion each year, it's a good time to question what really goes into the price of gas.

The numbers on the gas station sign hide a complex set of transactions. Before gas can power your car, it must be discovered as crude oil, traverse three markets, and be refined from crude into gas.

Inside, we'll explain the three markets, walk you through the role of refineries, and show how oil companies use creative tactics to manipulate gas prices...

The Three Markets: Contract, Spot and Futures

Both oil and gas are traded on three markets: the contract market, the spot market, and the futures market. Each is influenced by different factors and impacts the price of gas at different stages of production. Unlike the futures market, the contract and spot markets are not the kind of markets found on Wall Street; they are informal networks of businesspeople.

The Contract Market
Though it seems like oil companies spend most of their time ruining your day by raising the price of gas, their primary business is exploration. Once an oil company finds a field and coaxes it into producing crude, it takes that unrefined oil and sells to refiners. The vast majority of oil is sold by contracts. A veritable orgy of contracts signed between oil companies and dealers, oil companies and refiners, refiners and independent dealers predetermine the fate of most oil and gas.

Refiners plan their purchasing and refining activity to ensure that these contracts are fulfilled. In exchanged for this privileged standing, refiners charge contract customers a premium.

The Spot Market
Need some extra oil? Got a spare barrel you need to sell today? The spot market is for you. The spot market fills the gap left by the contracts market. When a refiner needs extra oil to meet its contracts, they find people with surplus oil on the spot market. Unlike the contract and futures markets, which trade pieces of paper, the spot market involves the trade of actual barrels.

The best deals are often found on the spot market. Since neither the buyer or seller is locked into a prearranged deal, the laws of supply, demand, and free market are mostly in effect.

The Futures Market
Crude oil is the bees knees of the American Mercantile Exchange. A futures contract might stand for 1,000 barrels of West Texas Intermediate to be delivered at Cushing, Oklahoma. The futures market represents that collective state of the oil market at any particular moment. When you hear reporters talk about the price of oil reaching $100 per barrel, they're talking about the futures market. Because fluctuations on the futures market are driven by information, its prices guide the contract and spot markets.

The people buying and selling futures rarely, if ever, collect on their contracts; a seven year period saw 5 billion barrels traded, of which only 31,000 were ever delivered.

Refineries

Refineries are the temples where crude oil gets Bar Mitzvah'd into gas. Shifts in the refining world over the past two decades have helped ratchet up the price of gas. In the early 80's, there were over 350 refineries, mostly owned by the oil companies. The oil companies didn't see refining as a place to generate profit, but as an integral part of a larger operation.

By 2002, there were only 153 refineries, and most of them were no longer controlled by the oil companies. Refineries are now held privately and independently, and as with any independent businesses, profit is key. It is in the refiner's interests to supply only as much gas as is absolutely needed to stay on the profitable side of the supply and demand curve.

Gas emerging from a refinery is sold at what is known as the 'rack price.' The rack price is the cost of gas to dealers, and it is generally influenced by the spot and futures market. The rack price is also where branded gas begins to exert a price premium.

Branded gas from Exxon-Mobile, BP-Amoco, etc, isn't different from the unbranded gas found at Joe Schmoe's Gas Shack. Still, there are several costs associated with branding gas. The brand name carries a premium, since people might associate it with quality, and not grossly overcompensated executives. Branded gas is also sold under contract, giving buyers long-term stability that can't be duplicated by unbranded gas. Oil companies also add value to branded gas by providing ancillary benefits that command a price premium, like branded advertising and branded credit cards.

Refiner pricing strategies are almost as complex as the mating rituals of the red-sided garter snake. Though refiners want to maximize their profit, they don't necessarily want to gain additional market share. Refining capacity can't simply be ramped up on demand. Acquiring and refining crude oil takes considerable time, leading refiners to take a slow and steady approach to business. First and foremost, refiners care about fulfilling their contractual obligations. Leftover gas can be sold for profit on the rack.

If a refiner's rack price is consistently too high, dealers will take their business elsewhere when their contracts expire. If the rack price is too low, buyers might swamp the refiner, leaving it unable to meet its contractual obligations.

To ensure pricing continuity, refiners used to call each other and share pricing information. Activist judges on the Supreme Court called this "collusion." The refiners, unfazed by the justices, came up with a crafty alternative: publicly posting their rack prices. Somehow, the Ninth Circuit Court found this to be illegal, too. Nobody knows how refiners discuss their pricing arrangements nowadays, but we wouldn't be surprised if it involved a members-only group on Facebook.

Gas Stations

Ah, gas stations. Nourishers of our cars, wellspring of our rage. Gas stations are not all alike. Some are owned outright by the oil companies, while others are leased by dealers who sell only one brand of gas.

There are supposedly nine benefits to being a branded lessee-dealer:

(1) a wider variety of grades of gasoline than unbranded, which leads to higher gross profit margins,
(2) access to oil company credit card at no fee,
(3) oil company third party fee discount for VISA and MasterCard,
(4) "subsidies" in the form of soft loans and investments,
(5) marketing assistance,
(6) rebates based on incremental volume,
(7) training and support on how to run a profitable gasoline station,
(8) technical support and station startup design, and
(9) security of supply.

Finally, there are the true independents. These folks shop around for the best unbranded gas price, sometimes aided by a jobber. They almost never sign long term contracts and almost always get their gas from the rack or the spot market.

At the turn of the 20th century, the U.S. had just under 175,000 gas stations. Of those, about 55,000 are run by independent operators. Of the remainder, half are run by open dealers, and the other half is split between company-owned and lessee-dealer stations.

Fixing The Price Of Gas

Oil companies set the price of gas at company-owned stations. What they say, goes. With lessee-dealers, the relationship is more complex.

Lessee-dealers are charged a 'Dealer Tank Wagon' (DTW) price by the oil companies. The DTW price is set either by the oil company's central or regional office, and is driven by both the spot and futures markets. Most importantly, oil companies determine the DTW price by looking at the prices of other stations in the market. This is why two stations with the same brand a block away from each other can have different prices.

Lessee-dealers can't negotiate a DTW price since they sign contracts with just one oil company that require them to purchase a minimum amount of gas. Oil companies allow dealers to sell gas at a slightly inflated margin to ensure a profit stream so the dealers can put food on their family's table. That margin can range from 3-10 cents per gallon.

Why don't dealers just raise the prices more, like 20 cents a gallon, so they can give their families even more food? Some do. If they're caught, you can bet anything the next DTW price will be higher, bringing their profit margins back to normal - only now, their gas is more expensive than their neighboring stations and they have a competitive disadvantage.

DTW pricing is the product of an exceedingly complex and secretive pricing scheme known as zone pricing. A zone can be as small as a single gas station, or as large as a city. The testimony of a Mobil representative in 1997 revealed that Mobil had 46 zones in Connecticut. Most dealers have no idea what zone they are in, even though the DTW price given to their neighboring stations can determine their standing in a local market.

Oil companies, like politicians reapportioning voting districts, rely heavily on technology to slice apart local markets. The DTW price in each zone will be different, taking account several factors including nearby competition, demographics, and the historical demand of the zone. Oil companies also seek to determine the price elasticity of each zone, or how much the zone will pay for gas before looking for alternative suppliers. For some zones, that breaking point is a penny, for others, it two or three cents, and some will stay with their station out of a sense of loyalty. These factors can cause the price of gas in neighboring zones to fluctuate by as much as a dime.

Oil companies adjust zone price by considering what their competitors are doing. The price of rival gas stations will be surveyed two or three times a week, or the data will be relayed to the oil companies by refiners.

Taxes

State and federal taxes account for about 18% of the price of gas. The cost is a constant and is factored into the baseline price of gas.

Eliminating those taxes would reduce the price of gas by a few cents, but would do nothing to otherwise address the underlying factors involved in pricing gas.

Ok... so why IS gas so expensive?

A butterfly flaps its wings in the Saudi desert, causing the State Department to release a warning of increased terrorist activity. The futures market flips out, sending the price of crude skyward.

The higher price on the futures market makes it more expensive for refiners to acquire crude to refine into gas. When the refiner's work is done, the emerging gas will be priced accordingly higher. This raises the rack price and the prices on the spot markets. Oil companies and jobbers with long-term contracts might be insulated from the higher price, depending on their contracts.

Refining oil into gas isn't instantaneous, and there can be a lag before the higher price of the oil is reflected in higher gas prices paid by jobbers and oil companies. That, of course, didn't stop them from raising prices the moment the futures market jumped. So now that the oil that was purchased for refining at a higher cost is ready to hit the market as gas, the oil companies will raise prices again.

This double-dipped price is passed onto dealers as the DTW price, which is then inflated yet again so the dealers can turn a profit.

You paid more for gas thanks to a butterfly.

"It's just a !@$% butterfly!," you say. Sure, but it scared the hell out of the markets. Since the oil companies all move in lockstep, that butterfly can cause the price of gas to rise for several days as one oil company sees another raising prices and adjusts accordingly.

Eventually the markets will calm and the price will begin to fall. This allows the introduction of a friend much more insidious than the butterfly: price gouging.

Despite popular misconceptions, price gouging almost never occurs as prices rise. Instead, price gouging occurs when dealers keep prices artificially high in order to gain a little extra profit or recoup costs, even though the DTW price has declined.

Sticking with our butterfly friend, let's say she caused the DTW price of gas to spike for four days. It may be ten days before dealers lower their prices. That's price gouging.

Most people never notice true price gouging. They will complain that the price went too high, but that's the fault of the oil companies, not the dealers. Prices that stay high for too long go unnoticed. Just because the price of gas stays high does not mean that a dealer is price gouging. The price may actually be higher. That's why it's almost impossible to prove, let alone prosecute, price gouging.

Conclusion
In a past life we were asked to prove that local gas stations were price gouging New York City residents. We knew this to be false, and found the proof we needed in a meticulously researched report from the Senate Permanent Subcommittee on Investigations. Most of the above draws on their work. The entire 324 page report makes for a fascinating read. Direct links to the report sections are below:
Executive Summary
Introduction
The Production and Marketing of Gasoline
The Effects Of Market Structure And Concentration On Gasoline Prices
How Gasoline Prices Are Set

Unless you're a Saudi Arabian butterfly, you can't hope to control the oil market, but you can control your consumption. Reduce your gas costs by carpooling, biking, walking, using gas price finder sites to decrease the information asymmetry, and/or switching to a car with a better MPG. — CAREY GREENBERG-BERGER

RELATED:
Get 30 More Miles Per Tank: Turn Off Engine If Idling More Than 10 Seconds
Potentially Insane Ways To Increase Your Fuel Efficiency

(Photo: Getty)

To protect yourself, Sheriff Ken Jenne of Broward County, Florida offers common sense advice like

• Roll up your windows
• Lock your doors
• Don't leave keys in the ignition
• Secure your valuables before stopping the car

Interestingly, thieves prefer SUVs, as the increased height gives them more cover when sneaking through the passenger side door. — BEN POPKEN

[via Consumer Reports Car Blog]

The Wall Street Journal offered some tips on getting the most out of your trip to the gas station. You may have seen the article already but we haven't and you learn through repetition, right? Tip 4 is pretty awesome.

There's also a free eBook [pdf 440 kb] from Lulu.com called 62 Ways to Save at the Pump.

There's also a thing called a bicycle.

[via StopBuyingCrap]