Conway accuses Marathon Oil of price gouging at the pumps

Attorney General Jack Conway
Attorney General Jack Conway

FRANKFORT — Attorney General Jack Conway accused Marathon Petroleum Co. LLC Friday of illegally raising the wholesale price of gasoline and other motor fuels in markets across Kentucky during a time of emergency due to heavy rains.

Conway filed a motion for a temporary injunction in Franklin Circuit Court against the oil company.

"I want to thank Kentuckians who called or e-mailed 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 in a statement.

"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," he said.

Conway's motion alleges that Marathon violated Kentucky's price-gouging law that was triggered when Gov. Steve Beshear declared a state of emergency on April 26 in the wake of flooding, largely in Western Kentucky.

Marathon spokeswoman Angelia Graves accused Conway of grandstanding ahead of Tuesday's election, in which Conway is running unopposed in the Democratic primary for attorney general.

"Once again Marathon Petroleum Company 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," Graves said. "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."

Conway's allegations are "without merit" and Marathon with defend itself "vigorously," Graves said.

Beshear said in a statement that he 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 was filed in the state's ongoing case against Marathon and its wholly-owned subsidiary, Speedway LLC, for alleged price-gouging violations following Hurricanes Katrina and Rita in 2005.

It 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.

A memorandum supporting the motion alleges that recent price increases by Marathon were not related to cost increases for the company, but instead were 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, Conway said.

A hearing on the motion is set for 9 a.m. Monday in Franklin Circuit Court.

The attorney general'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 attorney general's office said 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, which is required to be sold in Louisville and Northern Kentucky.

Conway said Friday that his office is referring that antitrust investigation to the Department of Justice's recently-created task force, formed at the request of President Barack Obama, to investigate allegations of fraud and market manipulation in the oil and petroleum industry.

"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.

Marathon supplies virtually all of the reformulated gas used in Kentucky. According to a petroleum industry expert who reviewed the market data at the request of Conway's office, wholesale prices in Louisville have increased following Marathon's acquisition of the Ashland refineries, and retail prices are higher than would be expected in a competitive market.

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