King of the AGs

Ala. attorney general issues first round of subpoenas in multi-state gas price gouging investigation

Published in CSP Daily News

MONTGOMERY, Ala. -- Alabama Attorney General Troy King said Tuesday that his office is issuing the first round of subpoenas in the multi-state inquiry of rising fuel prices following Hurricane Katrina, which was initiated by King on September 2 and joined by 44 other attorneys general.

King's office issued an initial wave of subpoenas seeking detailed fuel pricing data from more than 20 gasoline retailers. The subpoenas compel these retailers to provide comprehensive information dating back to July 1, 2005, setting forth the types and amounts of gasoline [image-nocss] purchased by the stations, how much they paid for it, the dates it was delivered, how much the stations charged to sell it to consumers, details and explanations of price changes and documents related to any discussions of gasoline pricing.

The subpoenas call for these records to be provided to King's office by September 30. The retailers who were subpoenaed today represent those about which the Attorney General's Office received the greatest number of complaints and those with more drastic price swings.

Alabamians are concerned that gas prices have spiraled out of control and that businesses are using a natural disaster as an excuse to increase their profit margins. I know this because my office has received over 1,100 calls concerning price gouging, and almost 900 of those calls were for gas prices, said King during a news conference.

He added, I share those concerns. Last week I pumped gas into my family's car and I wondered, just as thousands of other Alabamians did, why the price of the gas that was already in Alabama, already bought and paid for, and already in the ground at the station could increase in price.

[Editor's Note: The fallout from Hurricane Katrina has featured a lot of ignorance and demagoguery about prices, said George Mason University economist Walter E. Williams in his latest syndicated column. After Hurricane Katrina struck, gasoline prices shot up almost a dollar nearly overnight. Some people have been quick to call this price gouging, particularly since wholesalers and retailers were charging the higher price for gasoline already purchased and in their tanks prior to the hurricane. The fact of business is that what a seller paid for something doesn't necessarily determine its selling price.

To read the column and weigh in with your comments on this topic, please click hereto access the CSP Discussion Board.]

"The Department of Agriculture & Industries has been working together with the [AG's] Office to provide our expertise to monitor, test, and audit Alabama's fuel distribution," said Agriculture Commissioner Ron Sparks.

The subpoenas are issued in coordination with 44 other AGs who have issued or plan to issue similar subpoenas in their own states, territories and districts.

King said, Today, 44 state attorneys general have joined with me and are asking Why did prices increase?' We want answers. If we find that someone has taken illegal advantage of our citizens during this time of crisis, we will prosecute. If we find that someone has exploited loopholes in our law, we will work to fill those loopholes and strengthen the laws. If we find that businesses had a legitimate reason for the price increases, we will report that as well."

King added that he and the other AGs will be issuing additional subpoenas to gather information throughout the entire chain of oil distribution, piece by piece at all levels, to include refiners, pipelines, terminals, wholesalers, as well as more retailers and gas stations. All of the AGs will work closely to determine the relevant costs to produce gasoline, the sales prices and profit margins during the time leading up to Hurricane Katrina's August 29 landfall on the Gulf Coast and afterward, he said.

Dan Gilligan, president of the Petroleum Marketers Association of America (PMAA), told the Birmingham News that he was not worried about King's investigation or a similar one he knew about in Missouri. In the final analysis, I think people will find out that retailers are pricing responsibly, he said.

He said most retailers set gasoline prices based on what it will cost them to replace the fuel they already have. After Hurricane Katrina hit, he said, wholesale prices jumped more than $1 per gallon for some retailers that did not have contracts with terminals and had to buy gasoline on the spot market.

Gilligan said every industry has a few bad apples. But he added, When the truth comes out, everybody's going to see that 99% of the retailers out there have priced very responsibly.

The investigators will go to every link in the distribution chain for us to figure out who increased their prices by what amount and what was the cause of it, King told the newspaper. And then we can hold the appropriate people accountable.

King said he was not accusing anyone of wrongdoing at this point, but simply gathering information. Subpoenas don't prove anybody's done anything wrong. But they do ensure that we get accurate and complete information, he said.