Simple Supply/Demand, or Price Gouging?

Marathon gets targeted in attempt to tap both consumer anger and record oil company revenues.

In a prelude of what the landscape may hold for Big Oil, May of last year saw Kentuckys Attorney General Greg Stumbo tap into the wellspring of anti-oil company sentiment bubbling just beneath the surface by filing an $89 million lawsuit against IW 50 Best Manufacturer Marathon Oil and its retail subsidiary, Speedway SuperAmerica.

Stumbo’s suit charged that Marathon and Speedway SuperAmerica violated Kentucky’s price gouging law and the Consumer Protection Act during the state of emergency following hurricanes Katrina and Rita in late 2005. The suit stems from a 2005 investigation of Speedway SuperAmerica for alleged gasoline price gouging, and made Kentucky the first state in the nation to file a price gouging suit under a new consumer protection law against a major oil company.

The Houston, Texas-based oil refiner immediately countersued in an attempt to move the case to federal court; however, that strategy was denied repeatedly in the ensuing months, and the court proceedings have been moving forward in state court ever since, with a verdict likely in 2008.

According to executives, Marathon intends to make a courtroom stand against what it sees as an “extremely vague” law. “We are very disappointed with the actions taken by the state of Kentucky, and Marathon will vigorously defend itself in this enforcement action,” said Gary R. Heminger, Marathon executive vice president and president of refining, marketing and transportation operations. “Our goal each day is to provide our products at a competitive price at each of our retail locations. We have a 100-year history of supplying the Midwest markets with quality products.”

In its defense, Marathon believes that the law Stumbo cited in bringing suit is not only unclear, but is unconstitutional. According to the company, even Stumbo himself has stated the law on price gouging is unclear.

Industry Week