Five major oil companies told the U.S. Supreme Court yesterday that Maryland drivers are "suffering from a legislatively mandated conspiracy to fix prices" in the form of a Maryland law that prohibits big oil companies from owning gasoline stations in the state.
Similar legislation restricting filling station ownership to firms or individuals with no capacity to produce crude oil or refine it is pending or in force in 32 states, including Virginia and the District of Columbia.
The approach is defended as a means of promoting competition and lowering gasoline prices, but the oil firms' attorney, William Simon, told the high court it has just the opposite effect. The court's decision will affect markets nationwide.
"Refiners are denied access to the Maryland market and consumers are denied the benefits of competition across state lines," Simon said.
Exxon Corp., Shell Oil Co., Continental Oil Co., Gulf Oil Corp. and Ashland Oil Inc. have argued that their capacity to control things from the oil well to the gasoline pump enables them to provide fuel at the lowest possible prices. To forbid them to sell gasoline at retail, they said, is an unlawful restriction on interstate commerce. It also leaves the field open to inefficient, low-volume stations with political influence in Maryland, Simon said, "insulating them from the competition of lower priced, more aggressive dealers."
Maryland Attorney General Francis B. Burch replied that since Maryland had no crude oil or refineries of its own, all gasoline entering the state is controlled by the major firms, who sell it wholesale to retailers in addition to marketing it themselves.
That creates a situation where the major oil company can supply fuel to its own stations while withholding it from independent retailers, an event Burch said occurred during the 1973-74 Arab oil embargo.
"An independent who drops his prices may find he gets no gas" because it might be sold in competition with the big firm's own station, Burch said.
By restricting gasoline station ownership to firms or individuals wihtout crude oil or refining capacity. Maryland has ensured that all filling stations have equal access to whatever gasoline is available thus ensuring free competition, Burch said.
The justices questioned Simon closely on the issue of damage to interstate commerce, since the Maryland Court of Appeals upheld the state law early last year on grounds that there was no such damage. The five so-called "integrated" oil firms, those having the capacity to provide all forms of petroleum services from crude oil to gas pumps, that now do business in the state would be driven out, Simon replied, and the 32 other such firms would be foreclosed from doing business there.