Sticker-shocked Maryland drivers voice suspicions of price gouging

State is ill-equipped to investigate, control gasoline profiteering

Katrina's Wake

September 01, 2005|By David Nitkin | David Nitkin,SUN STAFF

With gas prices breaking the $3-per-gallon threshold at many Maryland service stations yesterday, Gioia Sawchuk was among many motorists wondering whether daily price jumps at the pumps are justified.

"I feel that the rate of increase is faster than it should be," said Sawchuk, a dental office manager from Parkville who drives a relatively fuel-efficient Honda Accord. "I think they're doing it too quickly, and it's not really reflecting the true increase in cost."

But Maryland officials are ill-equipped to investigate allegations of gasoline price-gouging that have accompanied the rapid increase since Hurricane Katrina knifed through the heart of the nation's oil refinery operations this week.

Like many states not often hit by natural disaster, Maryland has no emergency price-protection law. Earlier this year, Attorney General J. Joseph Curran Jr. proposed a bill to limit price increases on "essential goods and services" during emergencies declared by the governor or president, but a General Assembly committee unanimously rejected it after lobbying by gas distributors and retailers.

"You would hope and pray that Maryland retailers are fair with Maryland consumers," Curran said in an interview yesterday. "But right now, we don't even have the tools to determine that."

At least 19 states have laws or regulations that prohibit price-gouging on petroleum products or other goods in the aftermath of disasters, according to a manual prepared by the National Consumer Law Center in Boston and state attorneys general.

In New York, for example, the law was used to punish retailers who sold generators at up to 60 percent above their retail price after a hurricane in the 1980s. The statute survived a court challenge and was found constitutional, the manual said.

Even if the Maryland law had been approved, its provisions prohibiting post-emergency price increases of more than 10 percent would not be protecting consumers now: Gov. Robert L. Ehrlich Jr. has no reason to declare an emergency in Maryland, which is hundreds of miles from Katrina's destructive path.

Several of the states with aggressive price-gouging laws are frequently hit by hurricanes, such as South Carolina, Alabama, Mississippi and Louisiana. Florida lawmakers strengthened their restrictions earlier this year, making violations a criminal offense.

According to the Florida attorney general's office, a state hot line received 8,000 complaints of exploitive prices after last year's rapid succession of tropical storms, and 2,067 after Hurricane Dennis in 1999.

But with anti-gouging laws strengthened, just 53 complaints have been recorded since Katrina crossed the southern tip of the state last week, said JoAnn Carrin, a spokeswoman for Florida Attorney General Charlie Crist. Most of those have been for hotel rooms, food, water and ice, she said.

Curran said his lawyers are sensitive to the concerns of consumers and his staffers are exchanging information with attorneys general in other states to determine whether gas price increases are unfair.

He said his office drafted a letter yesterday to the Federal Trade Commission, "advising of the Maryland experience of dramatic increase in prices in just a matter of days, and questioning whether it is attributable to the tragedy."

"The FTC is the proper entity at the national level to deal with this because it's a national problem," he said.

F. Peter Horrigan, president of the Mid-Atlantic Petroleum Distributors Association, said charges of excessive increases by gas station owners in Maryland are most likely unfounded.

"Service stations are at the bottom of the food chain" from crude-oil extraction to the pumping of gas into cars, Horrigan said. "Their opportunities to price-gouge are slim to none."

He said a wholesaler told him that a refinery increased its price 35 cents per gallon Tuesday and an additional 64 cents per gallon yesterday morning - a 99-cent increase that has not yet hit the pumps.

"I'm relatively comfortable that a majority of gas stations are selling their product at a margin less than they were a week ago," he said.

Horrigan and other business groups opposed Curran's gouging bill because, they said, it was too broad and because prices for small-business owners often increase during emergencies and need to be passed on.

Still, Maryland and other states are scrutinizing business practices to make sure nothing unscrupulous is occurring. Illinois Gov. Rod R. Blagojevich, a Democrat, asked the state's Attorney General Lisa Madigan this week to expand an investigation into gouging after some reports of $4-per-gallon gasoline in central Illinois.

In Hawaii, a law capping wholesale gasoline prices took effect this week - and officials in California and others states are eagerly watching its impact.

But Sawchuk, the dental office manager, is not waiting for government help. She's endorsing an idea contained in an e-mail forwarded to her by a brother who lives in New Jersey, and which appears to be circulating widely on the Internet.

The e-mail calls for a boycott of Exxon and Mobil stations "for the rest of this year" - until prices come down to a wildly optimistic $1.30 per gallon.

"This is starting to fly around the country," she said. "In general, Maryland is a pretty good state in protecting consumers. But this is a national problem, and if we hit the companies in their pocketbooks, they will respond by lowering prices."

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