News-Miner Editorial
Cap fuel oil costs
Better price relief plan would target root of the problem
Published Thursday, August 7, 2008
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Stumble It!Passing even more of private energy costs in Alaska to state government is a policy fraught with long-term peril, but since the current emergency has made action inevitable, the Legislature should adopt a simple, limited program with a clear expiration date.
The program that best fits those criteria would pay only for the cost of heating oil above a particular price. The payments would not go to individual Alaskans but to oil distributors, which already keep the necessary records. The dealers would charge customers a set price, say $2.50 per gallon, and collect the rest of the market price from the state.
The market price would be set using fuel oil’s historic relationship to other petroleum prices outside Alaska. The consumer’s price cap would rise annually so it would phase out entirely within a few years.
This plan, touted by local attorney and legislative candidate Joe Paskvan, has a number of advantages over alternatives.
First, the state money goes to one of our most basic needs — heat. Simple cash payments to Alaskans, as both houses of the Legislature seem inclined to offer, would fail to target that basic need. The money could, and often would, be spent elsewhere.
Admittedly, there are creative ways that individuals can game a price cap to produce cash, but the problem would be much more limited by making sure the state’s money initially goes to dealers with precise record-keeping systems. Paying dealers would avoid the need for a new bureaucracy to accept and review receipts from every Alaskan with a fuel tank.
Capping the fuel oil price at something near $2.50, still high, would leave plenty of incentive for people to conserve. Ratcheting the cap up every year would reinforce that important message.
Limiting the state’s program to fuel oil also would address nicely the regional heating cost differences. Fuel oil heats most of the state. The price of natural gas, which heats most of Anchorage, has not risen nearly so dramatically.
Throwing cash at Alaska’s energy crisis is like trying to rid a yard of willows by mowing them down. Immediately, a multitude of new problem spots pop up. We need to get at the root of the problem. That’s a long-term effort; our short-term efforts should proceed cautiously and conservatively.
Community Discussion
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This is an excellent idea. That is a creative way to use our Royalty Oil. We need to get this idea to Governor Palin and our legislators ASAP.
Your criteria: a simple, limited program with a clear expiration date.
You say capping fuel oil prices at some amount and "racheting" them up each year, etc.... is the best way to achieve your criteria.
Really??
It seems pretty obvious that one one-time payment to each Alaskan (ala the Palin/house plan), attached to PFD checks, would be much much simpler.
We are all paying higher rates for fuel, whether for heat or transportation. Yes Anchorage has relatively cheap gas, but that's irrelevant. We are all Alaskans, residents of Anchorage included, and revenue from the state's oil belongs to all of us. It belongs to all of us regardless of how we use fuel, what type of fuels we use, and how much we use.
Dnm, you say that cash payment money "could, and often would be spent elsewhere [rather than on heat]." Don't you understand that no one labels their cash, as in "this $100 bill goes to heat, and this $50 bill goes to food, so now I have $1200 to blow on pulltabs and whiskey." This is not only Alaska in which we live, this is the interior, where people most certainly will spend whatever they need to (and potentially whatever they have) on HEAT.
You argue that "Paying dealers would avoid the need for a new bureaucracy to accept and review receipts from every Alaskan with a fuel tank."
But you overlook that it would create a need for a new bureaucracy to accept and review receipts from every supplier.
Again, a simple one-time payout is the most efficient way to help all Alaskans deal with high energy prices. A flat amount would be added to each PFD check--quite minimal bureaucratic expense. Leave the power in the hands of individuals, not the state.
The lack of leadership by our elected officials created this energy crisis. Voters told them to build the Alaska Gasline six years ago. But the politicians treated that mandate with contempt.
Efforts to build hydroelectric projects so we could enjoy cheap electricity have also been ignored as good projects like the Susitna damn have fallen by the wayside.
With a doubling of fuel costs the Interior is in real trouble. If enough residents leave we will lose hundreds of millions of dollars of equity in our homes with a declining real estate market.
Many folks are going to be burning wood and coal this winter and trashing our air quality. Most would rather not have to burn wood- but what choice do they have?
With poor air quality many of our citizens are going to have breathing problems, particularly our elders with hearth disease and emphysema. Long term, our poor air quality will cause lung cancer in some of us.
Reducing the cost of heating fuel- refined from the crude oil we own- is a reasonable plan, especially with the state sitting on billions of dollars of surplus money.
Legislators from Anchorage could not care less about us in the Interior- particularly Rep. Kevin Meyer- (Who works for Conoco Phillips) when he isn't screwing Alaskans in his representative job. Meyer has done more than anyone within the Legislature to try and prevent Alaska from providing a discount on heating oil.
Today is the last day of the special session. 452-4448 is the number for the LIO if you care to offer some input to those who are supposed to be representing you.
If the state is picking up the rest of the tab for "market price" over $2.50 a gallon it would not benefit the people the most.
Businesses involving transportation would benefit GREATLY. My husband and I live 3 blocks from his job, and drive a fuel efficient vehicle that only needs filling twice a month. We live in a one bedroom house with our toddler and have another baby on the way. We conserve as much as possible (All of us should be in times like these). I'm grateful for ANY relief don't get me wrong, but why should businesses benefit more from an energy program than individuals?
Fbksmom, small businesses are hurting too, they help drive our economy, don't leave them out of this equations. Your husband may only live three blocks from his job, but if that business can't survive, he may well not have a job to with to go. Businesses would not benefit "more" under this plan, they would benefit equally, that, I think, as it should be.
Oops, well maybe with some coffee my spelling will be better..
This is not a bad idea but it is just another bandaid! This is just a short term fix. This does not address the higher cost of electricity or the higher prices we all feel at the grocery store, hardware store and so on. Heating our homes is not the only issue we are dealing with. I am not short sighted that I don't realize this would help but more can be done with our states resources.
I guess it is better than a sharp stick in the eye.
This makes about the 4th time I've heard this plan. Let's do it already. Too much talking, not enough workin'....
If it is the 4rth time you've heard it, you should realize why it shouldn't be implemented by now.
The only way this plan doesn't leave the state open to abuse and still promotes conservation is to have the state pay the first $2.50 and the purchaser pays everything over that. It helps, puts a veritable hard cap on the states expense and still encourages people to conserve AND pay attention to their bills.
Seems like the market is doing just fine adjusting itself right now. If it keeps falling heating oil by December should be within most people's range and maybe even less as the winter goes on. People who are truly needy should apply for heating assistance, they have pretty liberal income guidelines.
The state should do nothing. It is not the states place to give free anything to anyone. Look what the PFD has become. Paskavan is badly misguided and looking for political points ... nothing more.
We each need to pay our own way and live within our means. Simply put, if you can't make it then you need to leave; however, you will quickly discover that this situation is NOT unique to Fairbanks, Alaska.
In the alternate, move to the bush.
The "BEST" thing the State could do is nothing. The slipery slope of giving has already made bums out of a lot of americans. Why should people work when they can get more by having babyes and collecting welfare? The more you give someone the more they expect, a never ending cycle. Giving more is not the answer, but to get those really good paying political jobs you must at least promice to give them something, this time its heating oil, next year Jim Beam....
Paskvan's proposal solves the energy and economic crisis of Fairbanks better than others so far as I can tell.
If the state spends $2Billion in dividends to residents then $500million or 25% will leave the state to the IRS and $1Billion will goto the Anchorage bowl where heating bills for 2500 SF homes peaked at $350/mos last winter. $500 million or 25% will aid Fairbanks, western Alaska, southeastern Alaska and others heating with diesel. Anchorage is burning another state resource, Cook Inlet Gas, with much better prices than the rest of the state pays for oil, so why is that equitable?
>$100 barrel oil is an economic crisis for Fairbanks that is impacting businesses, jobs, property values and consumer disposeable incomes. The total impact has not yet been felt or forcasted. This is the coldest city on the planet that is primarily dependant on diesel for power and heat. 100,000 people in the FNSB are being considered 2nd class to Anchorage if the only short term solution to the current crisis is checks to all residents.
$1 increase in fuel costs for any apartment building, or other income property equates to an estimated $10 decrease in value of the property based on income capitalization if the costs cannot be passed on the tenant. Watch what that is already doing as it unfolds in Fairbanks folks.
I just got my winter fuel oil delivery. Is the proposed cap on the price fair ? I think not.
Just give me cash. It's simple, straight forward, equal and fair.
The State is collecting $36,000 on my behalf this year from oil production.
The proposed $1,200 is little more that 3%. The legislature can do better than that.
I woke up this morning to find out that our friend Mike kelly voted against all relief. He voted against the $1200 cash, the against suspending the gas tax and against the fuel oil buy down and on and on...Kellys just an against 'er, without compassion. Nothing else makes sense.
So if we pay $2.50/gal on gas, heating oil, diesel, etc, while the state pays the rest; whats to keep the oil companies from just jacking the price up to $10, maybe $20 per gallon?
What we save at the pump will murder us during tax season. The state will reduce their own costs for oil by making every resident pay an oil tax to the state. Seems like a slippery slope to me.
I feel like the easiest and cheapest solution is still selling ALASKA'S CRUDE OIL to ALASKANS!!! You'll still get a dividend, not one worth two thousand dollars but you'll save more at the pump.
Maybe, just maybe, when Mike Kelly retired as CEO of GVEA and built his new house on the hill, free electricity for the rest of his life in Fairbanks was part of his benefit program! Maybe.
Sean, some of us DO earmark our money exactly the way you describ. It is called a budget. I track our finances in a computer program. With the click of a button I can tell you exactly what we spend on fuel oil, auto gas, lawn mower gas, electricity, food, household goods, clothing, eating out, mortgage, phone, cell phone, lawn fertilizer, softener salt, whatever. We started this program when we had kids 16 years ago and it has helped us stay in touch with reality and keep a strict handle on our spending so there is enough to go where it is most needed when it is most needed. It takes me about 30-45 minutes each weekend to log our receipts and plan our bills. Time well spent, and something everyone would benefit from doing. I guarantee many fewer people would be in collections if they knew how to do this.
i.e. electric heat
If the idea of this "relief" was for heating oil - this is the best plan. I imagine the only people that would be griping about this plan are the people that do not pay for heat.
This plan helps the landlord that pays for the fuel oil for his tenants and it also helps the renter that does pay for his fuel.
It is just a quick fix too though, because there does come a point when there really isn't too much more ratcheting a person can do to eliminate their fuel expenses. Short of turning off the heat and freezing to death!
I do not like the term "energy rebate". The state is making more than 600 million a month EXTRA above the huge profits it is bringing in normally. WE ARE THE STATE!! We should not only be expecting a revenue share, but should demand one. If a legislator is not in favor of a decent dividend from this HUGE WINDFALL we should work to oust them immediately. Granted, I do not like the govt. handing out money for no reason, BUT WE, THE STATE, have happened into a windfall that should be utilized by current Alaskans and have a sizeable chunk put into the PF for future Alaskans. A 3 to 5 thousand dividend would certainly not be out of the question though. And by the way, I am not a welfare receipiant, nor a new Alaskan.
I heat my house with coal. Others use wood, natural gas, or electricity. Capping the fuel oil price does nothing to help folks like me, unless I switch to fuel oil, which is exactly what we should all be switching *away* from! Price caps distort markets.
How exactly would the state determine a distributor's costs, so you know how much subsidy they deserve? The market cost of delivered fuel oil = cost to distributor for the oil + wages for employees + delivery equipment + rent for headquarters + phone bill + janitorial + ... Price caps require intrusive regulation and regulators to enforce.
Finally, how would you stop smart Alaskans from selling $2.50/gal fuel oil to other unregulated states for over $4? Price caps create an uncontrollable black market.
"but since the current emergency has made action inevitable..."
What emergency! The only inevitable thing I see is more money being wasted. Handouts only encourage the lazy.
I like James' post.
If you can't stand the cold, then get the hell out of Alaska.
So for all those who are saying that this surplus belongs to all of us as "the state" and that we should all get a share of the surplus, where were you a few years ago when the state was in a deficit and had to dip into the CBR to pay the bills? Since this budget shortfall belonged to all of us as "the state", were you there with checkbook in hand to help cover the deficit? In other words, that sword cuts both ways. If you want a share of the surplus because it belongs to you, then you can't complain when it comes time to pay a tax (sales, income, etc.) to the state when they are short, because the deficit will also belong to you.
If Obama can give out a tire gauge to fight the High price of Gasoline, I wouldn’t be a bit Surprise to find out that some of Our State Government Rep. will want to Give Out Heating-Oil "Dip-Sticks, to fight the High Cost of Heating Oil !
Pavel, it was my understanding that we are talking about heating oil only. I don't intend a cap to be on gas, diesel or whatever. We have to suck up our driving choices, (mine's a truck, BTW and it hurts to fill it). I meant that the oil user pay a flat rate, and then the company delivering be reimbursed for the rest. Whatever we do, it has got to be better than giving me a check and expecting it will even "wet" my oil tank. Besides, I pay enough taxes, I don't want to have to give it back in January. Also, I'm tired of the talking and nothing getting done.
Right on Chelly!
I just don't understand why you people think you are entitled to free fuel, free heat, free whatever.
The price of the fuel increased. You didn't plan for that, have not planned for that, and have no money.
That is not the fault of the state.
That's your fault.
Whatever sob story you have tucked away is nothing more than a crap-pile of excuses. If you are too unaware of your surroundings, both physical and financial, to recognize that the price of heating your home is going to require some planning and budgeting, then you probably deserve to freeze to death.
Boombam1215 is correct. If the dealers would charge customers a set price, say $2.50 per gallon, and collect the rest of the market price from the state, the dealers have no incentives to keep prices low. Competitive price cutting in order to attract customers is why businesses cannot charge anything they want. This is one of the stupidest policy proposals I have ever heard of. Even dumber than standard price caps that result in shortages and black markets.
DNM should require its staff writers to have at least a basic understanding of microeconomics.
And "local attorney and legislative candidate Joe Paskvan" should not be elected and also needs a much better understanding of microeconomics.
EVERY other part of the state receives a break on their energy costs EXCEPT the Interior. Anchorage residents have their natural gas regulated so that those folks pay about 1/3 the market value of the resource; Southeast Alaska's energy costs are low because of the hydroelectric dams; rural Alaska receives the Power Cost Equalization (and they still pay more than us). I admire the self-reliance of many of the bloggers and, at the same time, would like to see Interior Alaska receive the same kind of consideration that our fellow Alaskans around the state receive. I thank Joe Paskvan for trying to make sure that we receive some energy assistance here, just like everyone else in the state gets.
Wage and price controls always create shortages. You'd think that someone in the journalism business would understand economics 101. Prices are established by supply and demand. If there is an increasing demand with a diminishing (or constant) supply, the price goes up. Once the state interferes with supply and demand by setting an artifically low price for a commodity, the demand either remains the same - or it rises in response to the lower price - and the supply goes down even more. History is jam packed with places where the state set an artificially low price on something, leading to a shortage. The real solution is to increase the energy supply - if not with oil, then by increasing other energy resources such as hydropower, coal, wind, goethermal, or nuclear energy. What the finest journalistic minds in Fairbanks would give us with this proposal is a shortage of diesel fuel.
Other than that, a brilliant editorial.
How about using the $100,000 for the Palin investigation to find out why Alaska is paying over $1 a gallon more than the midwest and 70 cents more than the US average?
Most oil producing countries have realized that lowering energy costs for their residents paves the way to prosperity. We could give away 1,000 gallons to every household and not have a shortage. The combined usage of all residential fuels in Alaska is less than 15% of our refinery output in the state. I would rather see jobs created in industry than see bean counters working for the State administering more programs.
Capping is a waste and will not result in anything good. creating a temporary windfall for residents is smart until they figure out how to reduce the costs.
Here note that: Compact-Fluorescent light bulbs CAN BE VERY DANGEROUS!!!
Read: Mercury leaks found as new bulbs break (The Boston Globe).
...Even cleaning up the dust from a broken bulb is very dangerous...!!!
I guess it's too late to do anything about it now. Now let's just hope that every Alaskan will spend their money wisely and not end up like the grasshopper come winter.
"Capping the fuel oil price at something near $2.50, still high, would leave plenty of incentive for people to conserve." - letter author
The Chinese are currently paying somewhere around $2.50 to $3/gal, and they seem to be thriving. Oil is a GLOBAL commodity, just because you live in AK doesn't entitle you to cheaper resources than the REST OF THE WORLD. Arrogance, plain and simple. Europe is paying on average around $6 to $7/gal. And everything above the GLOBAL price of about $3-$5/gal is TAXES, aimed at reducing consumption. Guess what? Hasn't worked. But the Euro Govt's are making out good. But, sadly, not the populous.
I'm curious, if you insist on "capping" one companies prices, then is it okay to start "capping" YOUR business's prices. I think we all agree that coffee has gotten rather expensive, no? Should we then regulate those businesses as well, "capping" their prices? I only want to pay 50 cents for a latte. I see this as blatant anti-Capitalism, pure jealousy over the rich. Get over it, there will ALWAYS be some who are richer than you.
And this "energy crisis" is media hype. Most of us are doing just fine, and if your able-bodied and cannot provide for yourself, then just become more of a slave to the state.
Ken -
By voting no on measure 4 and creating mining JOBS so people can make MONEY to pay their way, is one way to help. Fish don't pay for heating fuel, people do. Quit telling other folks they have no money when you are voting against jobs they could use.
You are such a hypocrite it is UNBELIEVABLE. Go buy a 7th bike with all your riches you have. After all, you have a job, so what do YOU care, eh?
And you don't seem to care about the pioneers who built up what you have around you. Those folks are now seniors, some living on FIXED incomes. Should they freeze to death? And those with major medical issues? Should they freeze too Ken? Man, for being a wimp that a 15 year-old could beat up, you sure are mean and heartless.
I propose a petition to "cap" Ken's earnings. Then he'll be asking for handouts too.
Like I said: Have the fuc&ing balls to approach me in public. Until then, STFU.
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