"I want to thank Kentuckians who called or emailed our office to report the drastic changes in gas prices that reached more than $4 a gallon at the pump in many communities," Conway said. "Gas prices jumped about 30 cents overnight. The tips provided by consumers and retailers [image-nocss] helped us bring this action that will hopefully provide some relief for Kentuckians who are struggling to put gas in the car and clean up from flooding."
The motion alleges that Marathon violated Kentucky's price-gouging statute that was triggered when Governor Steve Beshear declared a state of emergency on April 26 in the wake of massive flooding."Once again Marathon Petroleum Co. finds itself singled out for litigation by a Kentucky attorney general on the eve of a primary election in which the attorney general is a candidate," Angelia Graves, director of corporate responsibility, said in a statement provided to CSP Daily News. "The original litigation accusing our company of violating Kentucky's emergency pricing law was filed in 2007 and the Kentucky attorney general's office has yet to articulate a standard by which we can reasonably judge the conduct of our business in Kentucky. We believe these allegations are without merit and intend to vigorously defend this latest move by Attorney General Conway, just as we have defended similar charges in the past."The motion, filed in the ongoing case against Marathon and its wholly owned subsidiary, Speedway LLC, for alleged price-gouging violations following Hurricanes Katrina and Rita in 2005, asks the court to require Marathon to lower its wholesale prices in all Kentucky markets to no more than the price charged on April 25.
(Click here for previous CSP Daily News coverage of the Kentucky AG office's allegations against Marathon.)
The motion uses an example of the Louisville wholesale market to illustrate the allegations. The motion alleges that Marathon's wholesale price for regular 87 octane gasoline at its Louisville terminals on April 25 was $3.25 per gallon and that it raised its wholesale price to $3.48 on April 29 and up to $3.46 on May 9. Thursday's rack price was $3.32. Wholesale prices for reformulated gasoline were raised from $3.45 to $3.65 and $3.61 on those dates. The wholesale prices vary depending on the location in Kentucky and the amount of fuel purchased, but similar reductions would be expected in all Kentucky wholesale markets.
Conway is alleging that Marathon's actions violate the price-gouging law, since the law only permits suppliers to increase prices if there has been an increase in costs to the supplier. The AG's office does not believe that cost increases in this case justify the price increases. The memorandum supporting the motion alleges that Marathon's increase of price was unsupported by any increase of costs, but instead was linked to an increase in the commodity spot market price and New York Mercantile Exchange future prices. Marathon has previously admitted in the case that spot market prices have been a primary factor in its pricing decisions.
A hearing on the motion is set for today, May 16, in Franklin Circuit Court.
The AG's office also launched an investigation in the summer of 2008 into the wholesale price of gasoline and how it affected prices in the Louisville market. According to information gleaned during that investigation, the AG's office believes that Marathon's acquisition of Ashland Oil in 1996 negatively impacted competition in the gasoline market in Kentucky and in particular in the market for reformulated gasoline (RFG), which is required to be sold in Louisville and northern Kentucky.
Conway announced on Friday that his office is referring that antitrust investigation to the U.S. Department of Justice's recently created task force formed at the request of President Obama to investigate allegations of fraud and market manipulation in the oil and petroleum industry. (Click here for previous coverage of the task force.)
"Our investigation is complete, and we feel there is sufficient data and information that the task force will find useful in its review of the industry and how industry operations may negatively affect consumers and prices at the pump," Conway said.
According to a petroleum industry expert cited by the AG's office, who reviewed the market data at Conway's request, wholesale prices in Louisville have increased following Marathon's acquisition of the Ashland refineries. In his opinion, retail prices are higher than would be expected in a competitive market.
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