When the 2006 Maryland General Assembly opened, motorists had reason to hope for some price relief at the gas pump. The legislature appeared poised to scrap a notorious state corporate welfare law that inflates gas prices and boosts revenues for retailers.
The statute, known as the Sales Below Cost law, sets a price floor on gasoline and weakens price competition on motor fuel. It came under public scrutiny last year after The Baltimore Sun and Washington Post ran articles on the law, prompting several lawmakers from across the political spectrum to file bills repealing the provision.
Under the law, a retailer is subject to state investigation if it under-prices its local competition. A retailer caught selling cheaper gas must prove to investigators that its lower prices are not “unfair” ? or else the state can suspend or revoke its retailing license.
Maryland adopted its SBC law in 2001 when traditional service stations, alarmed by the gas discounts at shoppers clubs, grocery stores and convenience marts like Sheetz and Wawa, asked lawmakers for protection. Back then, gas was selling for about $1.50 a gallon and consumers didn?t seem to mind the added cost of the price floor.
But with gas prices topping $3 last September and rising above $2.60 this spring, the legislature appeared to have no choice but to withdraw its gift to the gasoline business.
Alas for motorists, that appearance proved false.
Sen. Lisa Gladden, D-Baltimore City, withdrew her SBC repeal bill after a hallway meeting with service station owners and their lobbyists. A similar bill by Sen. Robert Kittleman, R-Howard, died in the Senate Finance Committee. On the House side, an SBC repeal bill by Del. Warren Miller, R-Howard, died in the House Economic Matters Committee after several lawmakers questioned the importance of lowering gas prices. Del. Hattie Harrison, D-Baltimore City, claimed that her constituents didn?t mind the added cost of the SBC law. Del. Brian Moe, D-Prince George?s, who authored the 2001 bill that created the price floor, argued that the SBC law is needed to place all gas retailers on an “equal footing.”
Too bad that footing is on consumers? necks.
Just like that, the state?s gasoline corporate welfare law was saved. Annapolis once again has ignored the plight of the consumer, who is now paying the highest price for gasoline in six months.
In fairness, it should be noted that the SBC law is only a minor contributor to the rise in gas prices that Marylanders are experiencing. Academic studies of SBC laws indicate the price floor increases costs by only a penny or two a gallon. But that increase is completely unnecessary and, in this time of high gas prices, any savings is welcome.
If current trends at the pump continue, Maryland motorists could face gas prices of $3 and above during this summer?s driving season. And they will do so with the grim knowledge that Maryland?s General Assembly did not lift a finger to help them.
Thomas A. Firey is managing editor of the Cato Institute?s Regulation Magazine and senior fellow forthe Maryland Public Policy Institute. John B. Townsend II is manager of public and government affairs for AAA Mid-Atlantic.
