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Maryland Hits Brakes on Fleeting Gasoline Price War

Gas taxes -- the biggest factor in price differences among states -- can vary widely. In Maryland, state taxes on regular gas total 23.5 cents a gallon, whereas the District's rate is 20 cents a gallon. In Virginia, the state tax is 17.5 cents a gallon; there's also a 2 percent sales tax in locations that are part of a Northern Virginia transportation district.

Environmental regulations that force some areas of the country to use cleaner-burning gasoline also affect prices. Different blends required in some urban areas and in California typically cost more to produce than conventional gasoline. Local competition, real estate prices and regional supply and demand can also show up in prices at the pump.

Joseph Bryan of Ridge, Md., fills up in Great Mills. "Wherever it's cheapest, that's where I get it," he says. (Marvin Joseph -- The Washington Post)

Maryland law prohibits companies that refine gas from operating stations. That means all Exxons and Chevrons, for example, must be operated independently. The independent operators argue that this creates more competition and lowers prices, though the Federal Trade Commission staff has said companies that operate both refineries and stations have efficiencies that can bring prices down. The District, Virginia and some other states have similar laws.

A debate also exists over the impact of laws governing minimum gas prices. In Maryland, independent operators stand on one side of the issue, with the FTC, the AAA auto club and big chains on the other.

Paul Fiore, director of government affairs for the Washington, Maryland, Delaware Service Station & Automotive Repair Association, said that without the law, chains would force independent operators out of business and eventually increase their prices. With the assistance of an Annapolis lobbyist, Bruce C. Bereano, the Bowie association argued to lawmakers that the law would benefit consumers in the long term.

"You have to look at where the market will be . . . after competition is removed," Fiore said. "Protecting competition creates a better consumer market. I don't see any hard evidence that this has been harmful to consumers."

Opponents say the law deprives consumers of the benefit of competition because it creates an artificial price floor. Even if independent operators were driven out of business, they said, the market would remain competitive.

"These laws are not necessary," said Mitchell J. Katz, an FTC spokesman. "They hurt competition."

Several economics professors were unable point to any definitive research showing that the law would ultimately hurt or benefit consumers.

R. Michael Cortez, vice president and general counsel for Sheetz, said the Altoona, Pa., retailer would like to sell below cost on occasion but not for extended periods. He compared a brief drop in gas prices to a sale held at a clothing store designed to draw in new customers.

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