Attention, drivers: Please know that Joe Mamo feels your pain.
“We’re a victim,” said the gasoline mogul under investigation by the District, “like everybody else in America.”
Mamo, a 44-year-old who emigrated from Ethiopia as a young man, built a four-state, 234-station, $778 million-per-year empire over three decades, starting with the 1987 purchase of an Amoco station on South Dakota Avenue NE. Today, he owns 45 stations in the city — almost half of the District’s total. If you buy your gas from an Exxon- or Shell-branded station in Washington, you are almost certainly buying from a Mamo-owned pump.
He’s now under government scrutiny: D.C. Attorney General Irvin B. Nathan disclosed last week that his office is investigating Mamo’s company, Capitol Petroleum Group of Springfield, for potential violations of the District’s antitrust laws — just as AAA Mid-Atlantic said local gas prices had reached “all-time record highs.”
“We’re going to do everything we can to bring [gas prices] down and be sure that it is a competitive market,” Nathan said.
But in an interview with The Washington Post, Mamo said that his prices are reasonable and that the recent price spike has diminished his profits by 20 to 30 percent. “Everybody’s getting squeezed. We’re getting squeezed; our dealers are getting squeezed, because how much can you raise your prices?” he said. “There’s no correlation between the increase in price and our profit. If we were gouging, it would be very clear we made a huge windfall.”
Mamo’s companies play a dual role in the local market. He owns service station properties, most of which he leases to independent dealers who set their own prices. But those dealers are also required to buy their gas from Mamo’s wholesaler, or “jobber,” which delivers gas from refiner depots to individual stations.
The operator of one of Mamo’s Washington stations, who asked to speak anonymously so as not to threaten his business relationship, said that he was concerned he was charged sometimes wildly different wholesale prices than other Mamo-owned stations nearby.
Mamo described those arrangements as the “norm” in the gas business and said that his station operators are happy, noting an annual turnover rate of less than 5 percent.
Matthew Lewis, an economics professor at Ohio State University who has studied retail gasoline competition, said it’s not unusual for a jobber to also own stations.
Mamo’s market share is “somewhat unusual” in a city of Washington’s size, he said, “but it is very typical in cities that might be a little smaller.”
Lewis said that it will probably be difficult for regulators to determine whether Mamo is using his outsize position to drive up prices. “This is pretty common, where investigations start during high gas prices,” he said. “But they never go anywhere.”
D.C. authorities have asked Mamo to hand over pricing information — what he has paid for the gas he bought from refiners and what he sold it to dealers for. Representatives of his company spoke Friday with Nathan’s investigators, Mamo said.
Nathan “can audit it, he can verify it and assure the public,” Mamo said. “We welcome him to certify the fact that we’re a victim just like the consumer and the franchisees.”
Mamo said he would not release the price information, citing business confidentiality agreements, but he said his markup as a wholesaler has ranged between 5 and 18 cents per gallon. During the recent price spike, the markup has been 14 or 15 cents — close, he said, to the national average. The District’s gas tax is 23.5 cents per gallon, the same as Maryland’s.
He rejected suggestions that the city probe is politically motivated; Mamo gave large donations to former mayor Adrian M. Fenty, who was defeated in September by Vincent C. Gray, who appointed Nathan. “I think this is just a frustration of gasoline going over four dollars,” he said. “This is something we’re going to have to go through and sit down with the AG and put this to rest.”
But some local politicos are skeptical of Mamo’s pleas of innocence — particularly since recent station acquisitions have increased his market share.
“He still owns almost half the market, and whether he is responsible for this particular spike, he still owns a disproportionate share,” said D.C. Council member Phil Mendelson (D-At Large), who applauded Nathan’s probe. “I don’t think any individual should own that much of any market.”
Lawmakers are also questioning Mamo’s two-tier business model. D.C. Council member Mary M. Cheh (D-Ward 3) introduced a bill Tuesday that would reinstate a city ban that existed from 2004 until 2007 on jobbers operating retail stations.
Mamo, who lobbied to overturn the measure, said that would be a “waste of time.” But Mendelson disagreed: “This article wouldn’t exist if we hadn’t repealed that law.”