By Elizabeth Coe
Capital News Service
Tuesday, Sept. 13, 2005

ANNAPOLIS - Oil industry officials on Tuesday defended the high cost of gasoline in Maryland, telling a legislative committee that price is a matter of supply and demand, and predicted that current prices would not be permanent.

While the national average for a gallon of regular gas has fallen below $3, according to AAA Mid-Atlantic, the average in Maryland is higher than in all but two other states at $3.17 per gallon.

Drew Cobbs, executive director of American Petroleum Council, said the main reason Maryland residents pay so much at the pump when compared to other states is the lack of supply from the damaged Gulf region.

Four refineries in the Gulf region are still shut down as a result of damage from Hurricane Katrina, and two are operating at a reduced capacity, he said. Two pipelines, the Colonial and the Plantation, deliver about 70 percent of Maryland's gasoline. Because Maryland is toward the end of the line, the state sometimes loses supply to other locations as the gasoline travels north.

Meanwhile, Attorney General J. Joseph Curran Jr. told the hearing before the House Economic Matters Committee that Maryland needs an anti-gouging law and that he would like to propose one to the General Assembly. He said he is working with other attorneys general in the country on the issue.

"Twenty-seven states and the District of Columbia have a gouging statute," he said, "and I suggest that Maryland become a state that has one."

But Curran faced questions from some delegates on how to define price gouging, and on whether such legislation would be effective. Calling his proposal a "strong recommendation," Curran said a price gouging law could make a big difference in preventing large price increases.

"Does it make a difference? It certainly has in Florida, and it certainly has in Tennessee," he said. "It may make someone think twice about doing it."

Most of the nearly three-hour hearing, though, was devoted to questioning Cobbs about high gas prices, and things the state could do to bring them down.

He refused to take a position when asked if the industry would support freezing the state's 23.5 cents a gallon gas tax -- suggested by some as one sure thing the state could do to make gas cheaper.

"We feel you should let the marketplace work, and the laws of supply and demand will work to lower the cost," Cobbs said.

Richard Carey, director of the Motor Fuel Tax Division, said Maryland has received about $767 million in gross revenue from the gasoline tax so far this year.

Most of the revenues from the tax in Maryland go to the state's Transportation Trust Fund, which is used to support transportation services and other projects.

Del. Brian J. Feldman, D-Montgomery, said while residents of his county are concerned with the high cost of gas, they don’t want to see construction projects halted.

"That would be a hefty price to pay," he said in an interview.

Del. Susan W. Krebs, R-Carroll, said she wants to ensure the public that the market is driving the gas prices and not opportunists who are out to make money.

"People don't realize once you start to regulate prices you're talking about even more shortages," she said in an interview after the hearing.

Cobbs told the legislators that current prices are temporary.

"It is a supply issue, and as soon as the supply becomes available prices will go down," he said. "The market reacts to what happens with supply."

Information from the Energy Information Agency indicates the supply from the Gulf region will fully recover in December, Cobbs said, but for now the supply in Maryland is still tight.

Banner graphic by April Chan, incorporating photo from the National Oceanic and Atmospheric Administration; Newsline Web content edited by Chris Harvey; Capital News Service stories edited by Adrianne Flynn and Tony Barbieri.  

Copyright © 2005 University of Maryland Philip Merrill College of Journalism