- The Washington Times - Thursday, August 23, 2001

A Maryland panel yesterday spoke out against "zone pricing" by oil companies, but decided against recommending a ban of the practice.

Zone pricing is the formula the companies use to decide how much to charge gasoline stations for petroleum.

The Task Force on Gasoline Zone Pricing presented a series of recommendations that pending further discussion among dealers, oil companies and the state comptroller would guard against anti-competitive practices by oil companies.

The recommendations ask that Maryland Comptroller William Donald Schaefer develop a way to investigate zone pricing, which often has been blamed for contributing to higher retail costs for gas.

Under the recommendations, Mr. Schaefer must investigate complaints of price differences between dealers of the same brand in the same area.

Competition, transportation costs and dealers' margins are acceptable reasons for price differences, the task force said.

The task force also asked that Mr. Schaefer and the Attorney General's Office closely monitor the marketing of gasoline and develop the expertise to monitor and understand the gasoline-distribu-

tion system.

"There's definitely a need that must be addressed," task force member Ronald Curry said last night. "I don't think we need to rid ourselves of zone pricing, but something must be done."

The recommendations are not final. Mr. Schaefer, gas dealers, distributors and oil company representatives will have discussions in the next few weeks to reach an industry consensus on the issue.

The task force will meet again Sept. 14 to finalize its recommendations to the General Assembly.

While some panel members pushed for a ban of zone pricing, dealers feared that would put oil companies on the defensive and less willing to negotiate. They also argued that a ban would be nearly impossible to sign into law.

"[Oil companies] can lobby down now," said Roy Littlefield, executive director of the Maryland Service Stations Association. "We didn't want to lose our bargaining power."

Mr. Littlefield said the recommendations would give the attorney general power to enforce existing laws.

"We don't need new laws. We need to enforce the laws already in the books," he said.

Oil companies and gasoline distributors set wholesale prices for stations based on zones they create in each state. Dealers can charge whatever price they wish but say they often must pass higher costs of gasoline on to consumers.

Critics of zone pricing contend that oil companies and other suppliers charge higher wholesale prices to stations in wealthier neighborhoods. But oil companies defend the practice, saying it stimulates a competitive marketplace. Exact information on zones is not divulged by oil companies, who say it is proprietary.

The Federal Trade Commission has never conducted a full investigation into zone pricing, but did review the practice when it looked into the reasons for high gas prices in the West earlier this summer. That review found no evidence that zone pricing was part of the problem.

Gov. Parris N. Glendening established the Maryland task force last August after a rise in gasoline prices.

Several states have considered bills in recent years to eliminate zone pricing, but none has passed.


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