LOUISVILLE, Ky. -- Kentucky Attorney General Jack Conway announced that because of information received during a preliminary investigation into Louisville gasoline prices, his office has issued civil subpoenas to refiners and suppliers of the Kentucky petroleum market and has asked the Federal Trade Commission (FTC), the anti-trust division of the U.S. Department of Justice, and the U.S. Government Accountability Office (GAO) to review the merger of Marathon and Ashland Oil.
Conway made the announcement at a news conference Friday afternoon in Louisville, where he joined Governor Steve [image-nocss] Beshear, Representative John Yarmuth (D-Ky.) and Mayor Jerry Abramson to discuss initial findings from a joint investigation into Louisville gasoline prices. "Our investigation has raised significant questions about the wholesale price of gasoline being charged in Louisville compared to other communities that utilize similar blends of gasoline," said Beshear. "We intend to get answers."
The preliminary data from the past two years shows that Louisville retailers have been paying about 10 cents more per gallon for gasoline when compared to prices reported in other parts of the state and region. Higher wholesale prices result in higher prices paid by consumers.
They urged federal anti-trust authorities to review the 1997 merger of Marathon and Ashland Oil and its impact on the entire Kentucky petroleum market. The FTC reviewed the merger in 2004 and determined it had not adversely affected consumers because retail prices were not out of line with other cities in the region. "With the data we've received, I don't think that's the case anymore," Conway said. "Louisville consumers are clearly paying a higher pre-tax price for gas today than they were ten years ago relative to other comparable cities in the region. We're also concerned about the prices in Northern Kentucky and the rest of the state."
"A significant portion of the Louisville market is being supplied by a single refiner, and we need to know if it is squeezing out competition and creating an unfair or illegal business environment," Yarmuth said. "We are calling on the FTC and the Department of Justice to conduct a swift investigation that we hope will provide some long overdue answers and relief for Louisville drivers."
The civil subpoenas sent by the Office of the Attorney General to retailers and suppliers seek explanations and data to determine why Louisville retailers are paying more for gasoline than their counterparts in other cities. "They have 45 days to supply the information we're seeking, and after analyzing that information we will determine whether or not to move forward with a lawsuit in this case," Conway said.
Beshear and Conway launched the joint investigation during the first week of July after receiving complaints from Louisville consumers who were paying about $4.30 per gallon for gas. That price was almost 30 cents more per gallon than other parts of the state, they said.
Economists from the Governor's Budget Office obtained two years of data from the Oil Price Information Service (OPIS). That data includes daily average retail and wholesale prices from July 2006 to July 2008. The budget office economists analyzed the two-week period from June 12 to July 2, when prices peaked in Louisville and dissected data for the two-year period to track trends in the market.
During the two-week period this summer, experts report that consumers in Louisville were paying an average of $4.16 per gallon for gasoline. Analysts then compared the pre-tax price of gasoline in Louisville to the pre-tax price per gallon for reformulated gasoline in other comparable regional cities. The pre-tax price was used because tax rates differ from community to community and state to state.
During the analysis, experts spotted similar trends that seemed to indicate that wholesale prices in Louisville have been higher than wholesale prices in similarly situated markets for the two-year period in which data was obtained.
Angelia Graves, a spokesperson for Houston-based Marathon, told CSP Daily News, "We were aware that the attorney general was looking into this since last month. Until he issued the subpoenas, we had not had any contact or request for information from the AG's office. We learned about this through the news. We plan to fully cooperate with the subpoena. We understand that he is going to be asking for some information about marketing in the area, and we are going to be responsive to his questions."
She added, "They have looked at the Louisville market based on some preliminary investigation—we weren't involved in providing any data. But we continue to be the most reliable and efficient supplier of gasoline in that market, and also in the Covington [Ky.] area. That's strictly due to the fact that we have refineries and logistics in place to serve that market in a very efficient manner."
Concerning an FTC review, Graves said, "The FTC reviewed the joint venture back in 1998 and looked at another study in 2004. They are a very knowledgeable agency and closely watch the market dynamics and the gasoline market throughout the nation, so you have to question whether there's a need for yet another investigation. But if it does remove any doubt about our company's activities, we'd welcome a review by the FTC."
Marathon is a petroleum refiner, marketer and transporter, operating primarily in the Midwest, Upper Great Plains, Gulf Coast and Southeast regions of the United States.With a refining capacity of 1,016,000 barrels per day (bpd), Marathon is the fifth-largest petroleum refiner in the United States. The company supplies petroleum products to approximately 4,400 Marathon branded retail outlets and 1,600 Speedway SuperAmerica (SSA) stores. A joint venture with Pilot Corp. has createdPilot Travel Centers LLC, America 's largest travel center network, with approximately 285 locations.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.