Subpoenas Issued on Gas Prices; State Seeks Answers from Suppliers, Refiners
By Dan Klepal
The investigation into why gasoline prices are higher in Louisville than in other parts of Kentucky and the region took a leap forward yesterday when state Attorney General Jack Conway announced that he has issued nine subpoenas to refiners and suppliers.
He wants information from them to help determine if there has been price gouging at the pump in Jefferson County.
Conway, Gov. Steve Beshear, U.S. Rep. John Yarmuth, D-3rd District, and Louisville Metro Mayor Jerry Abramson also asked the Federal Trade Commission and the Justice Department to investigate whether the 1997 merger of Marathon and Ashland oil companies has led to less competition in Louisville and driven up prices.
The companies subpoenaed have 45 days to respond to a list of about 20 questions. Conway will determine whether to file a lawsuit after evaluating those answers.
He would not say which companies were subpoenaed or disclose the specific questions.
But asked if the investigation was focusing squarely on Marathon, Conway said: "It is squarely on Marathon. They hold a dominant position in the market. We just don't know how dominant."
Conway said higher wholesale prices in Louisville make gasoline more expensive here. Figures over the past two years show Louisville has paid a wholesale price averaging 10 cents a gallon more than surrounding areas, he said.
"I want them to explain why gas is 10 cents higher over a two-year period," Conway said.
That price was 20 cents higher than wholesale prices paid in Chicago from June 12 through July 2, and 11 cents more than in Northern Kentucky during the same period, according to information provided by theattorney general's office.
Chicago had an average price of $4.16 over that period -- the same as Louisville, despite having nearly double the tax rate per gallon.
Angela Graves, a spokeswoman for Marathon, said yesterday that the company has two refineries -- one in Kentucky and one in Illinois -- that supply the Louisville area with reformulated gasoline.
She said Marathon is a "very efficient supplier" of fuel to the Louisville market and is one of six wholesalers in the area.
All the reformulated gasoline sold in Louisville comes from those two refineries. The wholesalers rely on Marathon for the fuel, then mark up the price charged to retailers from there.
Graves also noted that Marathon's merger with Ashland Oil was approved by the Federal Trade Commission, then reviewed again by the agency in 2004.
"There's a question about whether we need yet another investigation," Graves said. "But if it removes any doubt about our company's activities, we would welcome the review."
The FTC determined in 2004 that the merger did not affect prices in Louisville because they were in line with other cities in the region. "I don't think that's the case anymore," Conway said.
Conway and Beshear announced last month that they were launching an investigation into why gasoline prices are higher in Louisville. At the time, the fuel cost about 30 cents per gallon more in the metro area than in other parts of the state.
"We don't know enough at this point to conclude something unscrupulous is going on," Beshear said. "But our investigation has raised significant questions about the wholesale price ofgasoline being charged in Louisville compared to other communities that utilize similar blends of gasoline. We intend to get answers."
The initial phase of the investigation involved the state acquiring and evaluating gasoline-price information from the Oil Price Information Service. That initial work led to the subpoenas, Conway said.
"What we've found over the past six weeks has concerned us and raised warning flags," he said. "There's not a lot the Kentucky attorney general can do about international supply and demand.
"But if consumers are being treated in an inappropriate way, maybe we can do something about that."
8/23/08
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