9:54pm

Thu May 19, 2011
Statehouse News

Marathon Price Gouging Hearing

In Frankfort, two economic experts battled it out in a day long hearing in Kentucky's gas price gouging case against Marathon Petroleum.  The state is accusing Marathon of illegally jacking up gasoline prices during a state of emergency declared on April 26th and still in effect.  The company denies any wrongdoing.

Peter Ashton, a consulting economist for the attorney general's office, says the price hikes were grossly in excess of pre-emergency prices.

"And furthermore, based on other data that I had looked at, I believe that cost increases could not justify those particular price increases," said Ashton.

But Marathon's economic expert says the company has to raise and lower prices in order to remain competitive and there's no proof any of the increases were excessive. The state wants Franklin Circuit Judge Thomas Wingate to order Marathon to restore pre-emergency gas price levels, but he made no immediate ruling.

MARATHON'S EXPERT

The attorney general's office believes the price hikes are linked to commodity spot market price increases, not actual company costs, and violate price gouging statutes.

Ramsey Shehadeh, a consulting economist for Marathon Petroleum, doesn't deny the company uses commodity spot market prices to help make pricing decisions. But he says that's pretty much the norm.

"In my experience, I've never seen a refiner that would not look at spot prices," said Shehadeh. "As I mentioned before, they'll certainly consider their manufacturing costs in deciding how much crude to run, but in terms of setting the price for the gasoline they sell, they're always thinking about what their options are and when their outside option is the spot market, that's going to drive their rack price."

Judge Wingate says he may need up to five days before he renders a decision in the case.