Commonwealth Journal

April 22, 2014

FTC probing state gas prices

by Ken Shmidheiser
Commonwealth Journal

Somerset — The Federal Trade Commission (FTC) in cooperation with U.S. Attorney General Eric Holder, has agreed to review allegations of possible gas-price gouging in Kentucky. Such a review would be welcomed in Pulaski County where complaints about high gas prices have been rampant for years.

Although Kentucky Attorney General Jack Conway first filed his request with the FTC to review gasoline pricing in the commonwealth several years ago, it has just surfaced that the FTC review has taken on new momentum.

“The FTC originally declined to look into our study,” explained Alison Martin, a spokesperson for Attorney General Conway, “But that changed when a new FTC chairwoman, Edith Ramirez, was appointed.”

The background of the study now before the FTC begin in the late 1990s when the petroleum division of Ashland Oil merged with Marathon Oil to form Marathon Ashland Petroleum, LLC. Martin said that merger in essence resulted in Marathon in becoming a gasoline monopoly in Kentucky.

About five years ago Attorney General Conway and Gov. Steve Beshear studied the impact of artificially high gasoline prices in the commonwealth, and it was the findings of that study that were forwarded to then FTC Chairman Jon Leibowitz for federal review. The study found that Marathon Oil’s position as the sole supplier to gasoline in much of the commonwealth has constituted a monopoly and has contributed to high gas prices.

Conway has since met with the new FTC Chairwoman Ramierz, Attorney General Holder and the FTC commissioners to discuss the Kentucky data. While the FTC’s agreement to review gas pricing in Kentucky falls short of a full-fledged investigation, it does mark a significant victory for Conway and Beshear.

In 2007, Conway’s office filed a $90 million lawsuit against Marathon and its subsidiary Speedway LLC alleging price gouging in the wake of Hurricanes Katrina and Rita. That lawsuit has since been languishing in the Kentucky court system.

Following statewide flooding in April 2011, Conway again sued Marathon alleging the company of gasoline price gouging during an emergency. “Gas prices jumped about 30 cents overnight,” Conway said in a statement at the time. “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.”

However, in a statement Marathon said it was being singled out by Conway on the eve of a primary election.

”The allegations are without merit,” Marathon spokeswoman Angelia Graves said.

The issue of gas price gouging has been in the forefront of consumer complaints in Pulaski County where the price of a gallon of gas sometimes is as much as 50 cents per gallon higher than in regional cities such as Corbin.

“If gas stations want to raise their prices 30 cents a gallon overnight, that’s perfectly legal,” Martin said, explaining that Conway is limited to investigating gas-price gouging complaints only when they are alleged to have occurred during a declared emergency. During his time in office, Conway has fined about a dozen gas retailers $120,000 for violating gasoline pricing laws during emergencies.

Somerset Mayor Eddie Girdler and City Councilors have recently been reviewing the feasibility of opening city-owned gas stations to compete with the private sector. Somerset is unique in that Continental Refining Company operates a refinery within city limits, and theoretically could supply gasoline for public consumption to city-operated gasoline pumps at lower prices.

“If the city can do that, more power to them,” Martin said.