By Dan Klepal

An expert on oil pricing and economics has advised Kentucky Attorney General Jack Conway that there's something "extraordinary" happening in Jefferson County to push gasoline prices 30 cents to 40 cents higher than in surrounding counties.

Conway told reporters yesterday that his office has begun an investigation of the higher prices and is questioning gas retailers and wholesalers throughout the state.

The attorney general declined to say if specific companies are being targeted.

Gov. Steve Beshear announced the investigation Wednesday after gas prices had hit $4.30 a gallon in Louisville while remaining under $4 in other counties. Conway was out of town and unable to attend Beshear's announcement.

"A lot of people we talk to on a regular basis had a hard time explaining it," Conway said of the higher prices locally. "So naturally, we are suspicious. We are in the process of sending questions to retailers and wholesalers and studying market trends."

It is unclear how long the investigation will take, but Conway hopes to have all the information in about 30 days. Then his office will determine whether prices are artificially high in Louisville.

The state's Consumer Protection Act would allow investigators to issue subpoenas and compel testimony if industry leaders won't cooperate, or if illegal activity is uncovered, Conway said.

"If we find collusion, we'll immediately issue subpoenas," he said, acknowledging that any lawsuit to recover damages from a price-fixing scheme would drag on for years in court.

But "if the people of Jefferson County have been defrauded, then they're owed some sort of restitution," he said.

The state, under then-Attorney General Greg Stumbo, sued Marathon Oil in 2007 for allegedly overcharging customers of Speedway SuperAmerica stores in Kentucky by $89 million in 2005, during the two months after Hurricanes Katrina and Rita damaged oil operations on the Gulf Coast.

Conway said his office is pursuing that lawsuit and expects a trial next year. He said the state has retained an expert, who has not yet been identified, to testify against Marathon. The person is an expert in "oil prices as a commodity, refinement, economics and supply and demand," Conway said, and has advised his office on the higher prices in Jefferson County.

Conway's office has received more than 70 citizen complaints about the high gas prices in Louisville since Monday.

U.S. Rep. John Yarmuth, D-3rd District, attended yesterday's news conference and said he is working with other members of Congress on ways to limit speculation on oil commodities, which Yarmuth said could be doubling the price of oil.

"It's the single greatest factor in the rise in gas prices," he said of speculation.

Yarmuth has called on President Bush to use executive authority to force speculators to, among other measures, take delivery of the oil they buy.

"That would eliminate a lot of the speculators," Yarmuth said. He added that since 2000, when Congress exempted energy speculators from regulation, 70 percent of oil trading has been done by speculators and only 30 percent by the industry. Before the exemption, those numbers were reversed, he said.

Yarmuth's letter to the president said the Commodity Futures Trading Commission "has the ability to dramatically ease the burden high gas prices have on American families. ... The CFTC can investigate and decrease speculation in the oil market and ensure that prices are fair. Unfortunately, the CFTC has failed to use this power and stop excessive speculation."

Courier-Journal [1]

7/4/2008