Ehrlich decries gas price increases

But hourlong meeting with industry produces little explanation, no plan

State average is third-highest in nation

September 10, 2005|By Andrew A. Green | Andrew A. Green,SUN STAFF

Maryland gas prices, the third most expensive in the nation, are "artificially high," Gov. Robert L. Ehrlich Jr. said yesterday, but he emerged from a meeting with industry executives without a plan for how to lower them.

Ehrlich met in Annapolis for more than an hour with representatives of several petroleum companies - neither the governor's office nor a spokesman for the executives would say which ones - but said afterward that he was unsatisfied with their explanations for prices more than 20 cents higher than the national average.

"It's an intolerable situation in our state," Ehrlich said. "We are the third-highest in the nation, and I have not heard a satisfactory answer for it."

The governor said he will meet with the executives again Monday.

Gas prices averaged $3.23 a gallon in Maryland yesterday, behind only New York at $3.25 and Washington, D.C., at $3.34, said Ragina Averella, a spokeswoman for AAA Mid-Atlantic. Maryland prices are usually just slightly above the national average, which was $3.02 yesterday, she said.

Drew Cobbs, the executive director of the Maryland Petroleum Council and a spokesman for the industry representatives who met with Ehrlich, said gas supplies in Maryland continue to improve, but he said he could not predict when prices will decline.

Maryland has suffered more than other states because about 70 percent of its gasoline comes from the Gulf of Mexico region through two pipelines, both of which were incapacitated by Hurricane Katrina, Cobbs said.

Both have been restored, but because of damage to refineries, they are not operating at capacity. And because Maryland is near the end of both pipelines, much of the gas has been taken by states closer to the Gulf, Cobbs said.

"This obviously has had a significant impact on the supply and price here in Maryland," he said.

Another complicating factor, he said, is that the Clean Air Act requires gas stations in the Baltimore-Washington corridor to use a specialized blend of fuel to reduce pollution. That means supplies can't be bolstered by gas from neighboring states, making a tight supply even tighter, he said.

The Environmental Protection Agency has granted waivers from similar requirements to other states, but not Maryland. Ehrlich said that he believes the reason is that Maryland's supply situation isn't as dire as that in other states.

EPA spokesman John Millett said the agency grants waivers based on availability of the oxygenated fuel blend, not price.

"It's something we're monitoring, but there's no sign that indicates a real demonstrated shortage of fuel, which means supplies are adequate and that is what we look at," Millett said.

The National Taxpayers Union, an Alexandria, Va.-based group with 8,000 members in Maryland, sent a letter to Ehrlich yesterday asking him to back a reduction or suspension of Maryland's 23.5 cent-per-gallon gas tax. Georgia's governor, Sonny Perdue, a Republican, took a similar action last week.

"Given the ongoing price spikes associated with supply disruptions caused by Hurricane Katrina and record-setting gas costs that have been plaguing motorists for much of 2005, now is the time to use surplus state revenues generated in recent years by strong economic growth to cushion the blow," the group's government affairs manager, Kristina Rasmussen, wrote to Ehrlich.

Ehrlich has expressed skepticism about such an action, saying gas taxes are used to secure state transportation bonds and that a suspension of the tax would require action by the General Assembly, which is not scheduled to return to session until January.

He said yesterday that talk of a special session is premature but that he will meet with legislative leaders next week to discuss whether such steps are necessary.

Both Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch have asked the chairmen of committees that deal with the gas industry to hold hearings on the situation, and Miller said this week that he would favor a special session to address gas prices and slot-machine gambling.

Lt. Gov. Michael S. Steele, who attended the meeting with Ehrlich, said the administration's goal is to reduce Maryland gas prices by $1 or more in the near future, but the governor announced no concrete steps after the meeting to accomplish it.

Ehrlich said he discussed proposals such as lifting highway weight restrictions to help suppliers get gas to stations more efficiently, but the industry officials said that wouldn't help much.

Cobbs said the industry leaders promised Ehrlich they would do whatever they could to boost supply but that price is dictated by market economics and will adjust itself according to the demand. He, Ehrlich and Steele asked Marylanders to avoid filling their gas tanks unnecessarily in hopes of reducing demand.

But ultimately, Ehrlich said, market economics alone can't explain the price of gas in the state, and more action is needed.

"I do not understand," he said, "why Maryland has to be a top five or top 10 state when we're doing OK on the supply side."

The Associated Press contributed to this article.

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