Conway says Marathon Oil illegally raised prices

Bryan Cohen May 13, 2011, 4:00am


FRANKFORT, Ky. (Legal Newsline) - Kentucky Attorney General Jack Conway announced on Friday that he has filed a motion for a temporary injunction over an oil company's alleged price gouging.

Conway alleged that Marathon Petroleum Company LLC illegally raised the wholesale price of gasoline and other motor fuels in markets across Kentucky during a time of emergency. The motion alleges that Marathon was in violation of Kentucky's price-gouging statute that had been triggered when Gov. Steve Beshear declared a state of emergency on April 26 as a result of massive flooding.

"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 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 constitutionality of the state's price-gouging law was contested in 2009 when Marathon challenged a lawsuit brought by former attorney general Greg Stumbo after a state of emergency following 2005's hurricanes Katrina and Rita. The law was upheld by Franklin Circuit Court Judge Thomas Wingate in October 2009.

"General Conway and I recognize the importance of protecting Kentucky consumers, particularly in the wake of recent devastating storms and floods," Gov. Beshear said. "I issued the price-gouging executive order precisely so our Kentucky families will be protected from attempts to profit from disaster. I fully support the Attorney General's ongoing efforts to investigate instances of price gouging and bring offenders to justice."

The motion is part of an ongoing case from the price-gouging allegations after the 2005 hurricanes. Conway's motion 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.

The motion uses an example of the Louisville wholesale market to demonstrate the allegations. It alleges that Marathon's wholesale price for regular 87 octane gasoline in Louisville on April 25 was $3.25 per gallon and that wholesale prices were raised to $3.48 on April 29 and to $3.46 on May 9. Thursday's rack price was $3.32. Wholesale prices for gasoline that had been reformulated were raised from $3.45 to $3.65 and $3.61 on those dates. While wholesale prices vary depending on location in Kentucky and amount of fuel purchased, similar reductions would be expected in all wholesale markets in Kentucky.

Conway alleges that Marathon's actions are a violation of the price-gouging law, since the law only permits suppliers to increase prices if there has been an increase in costs to the supplier. Conway's office said that the cost increases in this case do not justify price increases.

A memorandum supporting the motion alleges that the increase in price by Marathon was unsupported by any increase in cost, but was actually linked to the rise in the commodity spot market price and the New York Mercantile Exchange future prices. Marathon has allegedly previously admitted in the case that spot market prices have been a primary factor in its decisions of pricing.

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