Maryland Hits Brakes on Fleeting Gasoline Price War
Friday, May 6, 2005
A gasoline price war erupted in St. Mary's County last week after one station slashed its price for regular to $1.999 a gallon and spurred three others to follow suit, giving drivers some hope of relief at the pump.
But the price dip proved fleeting.
Maryland regulators quickly stepped in and told the stations that their prices were too low. They needed to go up by 5 cents.
In as much time as it takes to fill the tank of an SUV, prices at BJ's Wholesale Club, Sheetz and two Wawa outlets bounced to $2.049 a gallon.
The sudden fluctuation in the Lexington Park area was the result of a little-noticed Maryland law that took effect in 2001. The General Assembly mandated that stations cannot charge less than what they pay for gas -- unless they're lowering prices to compete with a nearby station.
Independent service station owners pressed lawmakers for the measure as a way to protect themselves from big retailers selling gas below cost to drive them out of business and limit competition. Maryland is one of at least 13 states to adopt similar laws, which are not in effect in the District or Virginia.
Gas prices have hit highs in recent weeks because of rising crude oil prices driven by a growing worldwide thirst for oil and limited supplies.
With prices in Maryland averaging $2.20 a gallon for regular, drivers said they were displeased to learn the state had ordered the stations to boost their prices.
Mark Culbert, who lives near Lexington Park, was thrilled when he saw prices come down to $1.999 a gallon. But by the time he pulled his Ford van with a 35-gallon tank into the Sheetz, it was too late. "That kind of makes me upset that the state is going to say you have to pay a higher price," said Culbert, 36, a military contractor. "As a consumer, I'd like to see the lowest prices possible."
The Maryland law is one of many state and regional differences that can affect how much motorists pay to fill their tanks.
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.