Gouging Quest

Cumberland Farms, Pilot, othersfacing fuel pricing inquiries in several states

Published in CSP Daily News

HARTFORD, Conn. -- Governor M. Jodi Rell yesterday directed the Connecticut Department of Consumer Protection (DCP) to subpoena records from Cumberland Farms Inc. after the governor's office and the DCP received numerous, specific complaints about a sudden increase in gasoline prices at the company's stores. She also announced that subpoenas are being prepared for several other gasoline companies and said her administration is crafting specific language to define "price gouging" and make it easier to investigate and prosecute suspected profiteers.

Tennessee officials also have vowed to [image-nocss] investigate price-gouging by gasoline retailers in the wake of the Gulf Coast hurricanes as Pilot Travel Centers LLC denied illegally raising pump prices in Florida and North Carolina, reported the Associated Press. And Arkansas attorney general Dustin McDaniel is issuing more than 30 subpoenas to retailers across the state seeking information with regard to their increase in fuel prices. The moves follow similar actions by attorneys general in other states. ( Click here to view CSP Daily News coverage.)

The hot line Rell established last week to take reports of possible price gouging in Connecticut had received more than 500 complaints by Tuesday morning, her office said. The calls involve price increases ranging from a few cents per gallon to more than 40 cents per gallon.

About a third of the complaints concern a sudden increase of as much as 48 cents per gallon in retail prices at Cumberland Farms outlets. Cumberland Farms retailers have told motorists the increases stem from major spikes in the costs they were paying for wholesale gasoline deliveries.

"Economists and industry-watchers have warned that price increases in some areas are inevitable," Rell said. "We know that Hurricane Ike's blow to the Texas Gulf Coast affected about 20% of the nation's refining capacity; however, hard-pressed Connecticut consumers deserve to know all of the facts, including why the spike at Cumberland Farms appears so much larger than at other gas stations around the state. We intend to make certain any price increases in Connecticut are the natural result of a disaster like Hurricane Ike and not an attempt to take advantage of consumers."

The subpoenas for Canton, Mass.-based Cumberland Farms seek information about the chain's daily wholesale prices from the past two weeks, as well as information on the dates and times of wholesale deliveries. Subpoenas are also going to Cumberland Farms retailers seeking similar information.

The governor said she has directed DCP to prepare additional subpoenas for information about price increases at stations operated under the CITGO, Valero and Getty and Lukoil brands.

"People need to be careful not to immediately blame the local gas station owner," Rell added. "While there may be cases of alleged price-gouging by individual gas stations, almost all retailers make only a few cents per gallon even as 'Big Oil' racks up unprecedented profits. The gas station owners must pay credit card fees and other costs—yet they must also react to increases in wholesale prices that they cannot control. That is why our subpoenas focus on wholesalers and 'Big Oil' as well as local prices."

Rell said she plans to contact a wide range of experts, including retail-level dealers, to set a firm standard for defining "price gouging," especially in volatile markets such as retail gasoline. Legislation to revise the standards would be offered when the General Assembly meets next year.

Tennessee officials also have vowed to investigate price-gouging by gasoline retailers in the wake of the Gulf Coast hurricanes as Pilot Travel Centers LLC, a Knoxville, Tenn.-based chain of gas stations and travel centers, denied illegally raising pump prices in Florida and North Carolina, reported the Associated Press.

"We are analyzing whether the spike in gasoline prices across Tennessee is the result of price-gouging or a reasonable reaction to supply disruptions in the wake of Hurricane Ike," Tennessee AG Bob Cooper said in a statement. "There is a difference between profits and profiteering."

"We are 99% sure that we have done everything right," Pilot CEO Jimmy Haslam told AP.

Pilot operates 340 travel centers and convenience stores in 41 states, concentrated mostly in the Southeast and Midwest. Ohio-based Marathon Ashland Petroleum is a partner.

Pilot retail prices in Knoxville peaked at $4.99 a gallon on Saturday and Sunday, said AP. They dropped to $4.49 Monday morning in anticipation of a new petroleum shipment Monday from the two major pipelines supplied by Gulf Coast refineries; more are slated to arrive later in the week.

"If you are an attorney general and you are getting all kinds of complaints, you have a right to ask for information from retailers like ourselves: What was your retail price? What was your cost?" Haslam said. "We understand that. We will fully comply."

Haslam said the compounding effects of Hurricane Gustav followed by Hurricane Ike worked to reduce supply and then raise wholesale prices. Some stations in the Knoxville area ran out of gasoline on Friday amid panic-buying. Haslam said Knoxville suffered more than most places because it is at the end of the Gulf Coast pipelines.

As a large volume retailer, Pilot saw the wholesale price of gasoline on the spot market jump $1.60 a gallon in three days, pushing up pump prices. Even at $4.99 a gallon retail, Pilot's profit still was less than a dime a gallon—about 7.5 cents, Haslam said.

"We believe the situation is temporary," he said. "I hope by the middle of the week supplywise and pricewise, things return to normal.... We want to see it back in the $3s and, if possible, back in the $2s."

Haslam said Pilot had price-gouging inquiries from 15 to 20 states after Hurricane Katrina three years ago. No wrongdoing was found in any case involving gasoline, he said, though the company paid a $61,000 fine for a single incident involving unfair pricing on diesel fuel.And citing Ike, Arkansas AG McDaniel raised concerns about price gouging at the gasoline pumps. Since Friday, his office has received more than 1,450 phone calls, he said, and more than 2,400 text messages and emails. As a direct result of the information sent in by citizens, the AG's office is issuing more than 30 subpoenas to retailers across the state. Each recipient has 20 days to respond. On Friday, Governor Mike Beebe declared a state of emergency for the entire state, triggering the price gouging statute for the next 30 days.The stations included a Kum & Go in Jonesboro; three KG Gas Markets in Osceola; Arkansas Travel Centers in Choctaw, Marshall, Conway, Greenbriar and Damascus; nine Day & Night stores in Englandm, Camden, Sheridan and El Dorado; five Hard Hat Stores in Blytheville and Osceola; 31/38 Grocery in Ward; five Gary's Food Marts in Mississippi County; S&H Quick Stop in Imboden; Hess Oil Co. in Alexander; and Pilot Travel Center in West Menphis/Russellville.