THE OTHER DAY a report in this newpaper by Phil McCombs provided a precise and detailed explanation of why fuel oil is cheaper in Baltimore than in Washington -- by as much as 10 cents a gallon. Part of the explanation is Baltimore's position as a major port. A larger part is Washington's disproportionate dependence on firms that rely on what's known as the spot market for oil.
One local firm in particular, Steuart Petroleum Company, has filled its tanks with oil bought on that very volatile spot market. Most oil is traded under contracts that call for continuous delivery over a period of time. But the system has traditionally run with a little slop. There's always more oil around than is required by the contracts -- and in the past that oil has generally gone at cut-rate prices. The independent filling stations underselling the major brands generally stayed in business by buying here and there at spot, wherever they could find someone with a temporary excess to get rid of.
Steuart is not an integrated company; it does not have wells or refineries of its own. It buys a lot on the spot market. Since the Iraninan revolution started a worldwide scramble for oil a year ago, spot prices have gone very high -- far higher than contract prices. That has pushed up Steuart's prices, and Steuart supplies many other Washington area retailers. Steuart, incidentally, isn't alone. Even some of the very big integrated companies -- Amoco, for example -- have had to buy on the spot market, and the effect is visible in their current prices. While Steuart's customers will be paying more than their counterparts in Baltimore, they can at least take some comfort in the thought that there's a substantial reserve for the winter in the company's big tanks at Piney Point.
Unhappily, it also turns out that, like a good many other commodities, fuel oil usually costs more in the low-income neighborhoods of the inner city. The small distributors who operate there are supplied through chains of middlemen. It's not that their profits are higher but rather that, like the small corner grocery stores, their structure is less efficient. Oil prices are high throughout the Washington area, but they are highest where there are the fewest resources to meet them.