Dual Alaska inquiries examine high gas prices
Published Tuesday, October 21, 2008
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Stumble It!FAIRBANKS — Gasoline prices are plummeting throughout the nation, dipping below the $2.50/gallon mark in Oklahoma.
But the bill for Alaska gasoline isn’t dropping as quickly, even as two separate investigations continue into high gas costs.
The average price for a gallon of unleaded gas in Alaska was $3.887 Monday, according to data from the American Automobile Association. The Fairbanks average was $3.765, $3.619 in Anchorage and $4.052 in Juneau.
Investigations are underway by the consumer protection unit of the state Department of Law and by a legislative committee.
The public is worried about prices and wants action, but there is little the legislature can do, Rep. Jay Ramras (R-Fairbanks) acknowledged. He is chairing the hearings.
“We’re very limited in what we can do, other than shine some light on a process that is, obviously, way too slow for Alaskans,” he said.
A more powerful impact could be felt if Gov. Sarah Palin weighs in on the investigations.
“The governor still has the best bully pulpit in the state, whether she’s the vice president-elect or the governor,” Ramras said. “She could put her shoulder into this effort and make some phone calls to the refineries. I think that would be the most powerful thing that could happen.”
Palin’s deputy press secretary, Sharon Leighow, said it’s unlikely the governor will intervene in the ongoing investigation by the Department of Law, but that some preliminary results could be ready by year’s end.
Attorney Ed Sniffen is heading the Department of Law investigation. The query is intended to unearth any wrongdoing, such as anti-trust violations by refiners or retailers.
The national average for regular unleaded gas was $2.923 per gallon Monday, according to AAA’s retail gasoline prices Web site, www.fuelgaugereport.com. Oklahoma boasted the lowest average at $2.485 per gallon, while California recorded the highest in the Lower 48 at $3.314. Alaska’s prices topped the charts, bypassing even Hawaii’s $3.791.
That was down significantly from the average price a month ago, $3.777 per gallon, but not quite as low as the average one year ago, $2.824 per gallon.
The highest average recorded price was $4.114 on July 17.
Historically, Alaska’s prices held steady with those in small, rural Outside states with a low population density.
But Alaska’s prices broke free from fluctuations in the Lower 48 in June, according to AAA data. Outside prices leveled at about $4 per gallon, then started a slow decline. Alaska prices continued to climb, peaking at $4.68 per gallon in July before leveling off. And while the decline has paralleled that of prices in the Lower 48, the gap between the two averages is much greater than it was before June.
The legislative inquiry began Sept. 10 in Fairbanks, and will continue with a second hearing at 9 a.m. Thursday in Anchorage. A third hearing is scheduled for November.
While lawmakers are optimistic their efforts will pressure refiners and retailers to keep prices in check, the attorney general’s investigation is more likely to net solid answers, Ramras said.
That’s because Sniffen can work with refiners and others using confidentiality agreements in exchange for access to proprietary information.
Thursday’s agenda includes testimony from Barry Pulliam, a senior economist with Econ One Research; a Department of Law investigation update; and input from two of the state’s three petroleum refiners. While officials from Flint Hills Resources and Petro Star are expected to attend, Tesoro Alaska representatives will not.
Kip Knudson is the external affairs manager for Tesoro Alaska. He said there simply isn’t much more the company can say to legislators without divulging proprietary information that, if made public, could actually violate anti-trust laws.
“I know the legislators were getting quite frustrated with me (at the first hearing), but there is just some stuff we can’t talk about in a public forum,” Knudson said.
Tesoro is cooperating with the Department of Law investigation, and 10 to 15 employees are making data-gathering a priority.
“We’re providing Mr. Sniffen any and all data that he is requesting,” Knudson said. “The magic about that forum is he will hold proprietary data confidential, so we don’t have to violate anti-trust laws. We’re going to be giving a lot of very sensitive and confidential information that our competitors would love to have, and vice-versa.”
The data could include information on market share and sales figures, he said.
At the first hearing, refiners indicated they weren’t making much of a profit, and that the costs of doing business in an increasingly regulated environment is hurting their bottom lines.
“The difficulty is that it doesn’t appear that the refineries are violating anti-trust laws,” Ramras said. “What we have here is an effective duopoly, and we don’t know how to crack that nut.”
Tesoro’s and Flint Hills’ refineries supply most of the state’s home heating fuel, gasoline and jet fuel.
The legislative committee will recommend continued hearings until those prices “recouple,” Ramras said.
Contact staff writer Rena Delbridge at 459-7518.
Community Discussion
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How true in your comment. The legislators do not care that we pay high gas prices. If they did they would do something about it. But since they get all these perks and freebees being politician they do not care. Sounds like our congress they do nto care about any type of national energy plan. They care about special interest and satying in power!
Hi all
Here in Glenpool, Oklahoma (7 miles south of Tulsa)all of
the gas stations are at $2.32 per gallon. I understand that
it is about 15 to 20 cent less in Oklahoma City.
Have a great day!
hah!
thanks Todd - that should make everyone pretty happy 'round here.....
I would guess the bulk of their sales would be to the government, why is it that they do not know the contract information? They are getting their crude for the state, is no one keeping tract of that information.? It just seems to me that they are hiding behind the anti trust thing, I would bet a good account could tell you pretty close just what their profits are, but our GUT LESS politions are afraid to ask, they need to get re elected above all else, shame on all of them....
The CEOs of Flint Hills and Tesoro must be laughing all the way to the bank. They continue to charge whatever the market can bear while we blame the government instead instead of them.
When it comes to fuel prices, the State government is a toothless tiger. They have no authority to regulate prices, no means by which they can either reward nor punish the oil companies. For all of their posturing and bold talk there isn't a damned thing the politicians or bureaucrats can can do except hold meetings and issue press releases.
The oil companies charge whatever the market will bear. Since no one else is selling the product any cheaper than they, they are handsomely rewarded for doing so. The only thing that will bring fuel prices to anything resembling 'reasonable' will be the introduction of less expensive energy sources.
The only thing we can do is buy as little of their products as we can get by with and hope we can reduce the demand enough to impact the companies' bottom lines.
It is 2.05 down in Southern Texas. Something seems rather fishy and its not the spawning Silvers.
Pat
Yeah, and Flint Hills is owned by Texans.
The best way to break the duopoly is through competition. Absent a new refinery being built, we need to enable access to imported fuel. To do this we need to have a marine fuel terminal that is not owned by the refinery. A public or co-op managed fuel terminal could save Alaskan's more than the energy rebate check on an annual basis. The difference in wholesale price between Alaska and Washington is hovering around $1 a gallon. This is 5-6 times the added cost that transportation would add.
Alaskan's should NEVER pay more than the pump price in Washington. WA has 36 cents more state tax than AK which is way more than the transportation cost. If there was a marine terminal not controlled by the refineries we would never again pay more than Washington.
Fairbanks, Anchorage, and Juneau are not the only Alaska towns that are paying for gasoline. Villages are paying $6.37 to $10 a gallon. Is Rep. Ramras going to see why that is the case when the rest of Alaska is crying about paying $3 to $4 a gallon for gasoline?
The investigation needs to look at the fuel cost problem from a state-wide perspective not just the Railbelt and Juneau.
OPEC is meeting this week and oil prices have already started to rise based on the report they will cut production to raise prices. How much you want to bet that despite not seeing a drop in prices, we will see an increase in prices. The key words is there is very little the legislature can do. Well what about the attorney general.
Fuel could be free in Oklahoma,you can still count me out!
How about diesel fuel at the pump? We are way off on that also! Do you know there are some states paying less for diesel fuel at the pump then what we are paying to put on our home heating oil tanks. How do you explain that one? There is not road tax for our heating oil!
I don't believe that there is nothing more the legislature can do that hold meetings.
AMEN to Andora,
Development in rural Alaska has been stiffled for many years due to lack of access to energy. The role of government is to provide essential services which citizens cannot provide through private enterprise. Traditionally these services have been security, education, transportation, and communication. I suggest that it is time to include energy in the mix. The State owns the Alaska Railroad(a large consumer and transporter of petroleum products) and the marine highway system. Perhaps it is time for the State of Alaska to build a refinery to refine its 12.5% royalty share of production and formulate a parity pricing system for the entire state.
Rep. Jay Ramras will come riding in like he is marshall Dillon with his six gun a blazing. Only to find out that the oil company's lawyers will confirm what we already know, he is really just Festus with an expensive pair of cowboy boots on and no twang to his song.Their reply will be "Get along little doggie get along."
Development in rural/bush Alaska will never happen simply because there aren't roads connecting it to the rest of the state, or a reason for people to go there. Development takes people, and is pushed by a need. It's a given locations without roads will pay for fuel, and those places should be looking for alternative energy before anyone else (Wind, Geothermal, even Solar in the summer), or small hydro.
Alaska is being gouged, and those in power are in conspiracy with them. Nothing with happen while Queen Palin is off doing it is she's doing. Most of the Legislative is in cahoots. so Alaskans aren't being represented.
Looks like whole sale heating is going for 2.20 and gasoline 1.68 NYMAX
-http://futures.tradingcharts.com/marketquotes/index.php3?market=CL-
The state of Alaska marks the price of royalty crude up about $70 more than the cost of production.
Does anyone think the $70 wholesale mark up effects the pump price?
In addition to what price gouging is going on?
I notice some here who, based on past posts, are supporters of the conservative (Republican) agenda now seem to be saying that the legislature should do more to force the refineries to lower their prices in Alaska. If it were another subject, perhaps one that didn't involve their wallets so much, they would be the first to scream SOCIALISM if the government stepped in. You guys who are all for unbridled capitalism (and you know who you are) can't have it both ways! The capitalistic laws of supply and demand are functioning perfectly and you should all be proud that socialism has not permeated our great state with price controls. For the more left winged amongst us, lets carpool, wear sweaters, and basically use less so the nasty oil men don't make too much profit on this "crisis".
Good comments- Andora
You hit it right on the concern, this is a State wide Perspective and Jay Ramras is working on the best interest of the Residents of this State and including his district.
The hype about legislators looking into why we are paying high prices, doesn't mean anything. The expression, "that dog's all bark and no bite", comes to mind. There's NOTHING the state can, or will do about it. The "investigation" is just for show.
The only thing I am sure of, is that it's not the local distributors doing the gouging. They actually are in a competitive market. They are closely knitted with the community and do what they can, to make sure we can afford to heat our homes.
The time for talk is over! Do something about our gas prices!
It seems to me the wholesale price of crude is set by the state which is making at least 70 bucks pure profit selling our royalty oil to make jet fuel and Heating oil.
If the price of corn goes up - the price of corn flakes, meat and everything product made corn goes up!
The whole sale price on NYMAX of oil products gives you an approximate idea of refinery to pump mark up. Diesel was $4.30 at Sam's and $4.43 at the other pumps (NYMAX was $2.30)
#1 Fuel oil and #1 diesel is about the same thing.
the free market rules..we are republicans here in AK? why does anyone want to mess with the free market fuel prices? the refiners and retailers have the RIGHT to sell thier product at any price. don't like it? move to venezulea with Chavez!
1AKfox, the markup is all at the refinery level. I have watched 3rd party margin reports over the past few years and the retailers actually operate at lower margins than the rest of the US. Many times the box stores are selling at or below cost through their rewards programs.
Justasking, should the electric, water and sewer companies operate is an unregulated market as well? At what point would you disconnect your water and electricity? It would cost at least 50 cents kWh to run a generator. Should GVEA be allowed to charge 49 cents kWh?
"It seems to me the wholesale price of crude is set by the state which is making at least 70 bucks pure profit selling our royalty oil to make jet fuel and Heating oil."
"The state of Alaska marks the price of royalty crude up about $70 more than the cost of production."
1AKFOX, This is an interesting way of putting this. Could you be more specific about this? Does the state actually set the price of royalty oil being sold to the refinery, the 1/8 Alaskan share at a price that is more then the world market going price of a barrel of, say Exxon, or Conoco oil coming down the same line? Also are you suggesting that the state profiting from royalty oil is a bad thing? Should the state not make any profit, in other words, give its share of oil to the refinery for free? Would that make the pump price for heating oil drop in direct proportion statewide, or would it give the refinery more room to price gouge?
fairbanksgas says"Justasking, should the electric, water and sewer companies operate is an unregulated market as well? At what point would you disconnect your water and electricity? It would cost at least 50 cents kWh to run a generator. Should GVEA be allowed to charge 49 cents kWh" having water and electricity connected to your home is a CHOICE, no one forces you to buy your h2o or electricity.
yes, free market rules
also you are making an assumption that I'm am connected to water, and electricity. so yes GVEA should be able to charge whatever the market will bare. even more than 49 cents a kWH.
akbearable
PART 1
My reply is between the [ ]
"The state of Alaska marks the price of royalty crude up about $70 more than the cost of production."
[The estimated cost of production is estimated at between 2-$15 per barrel. I personally think it is probably around $5 because the oil fields and pipe line have been in production for many years]
My reply is between the [ ]
"The state of Alaska [snip] $70 more than the cost of production."
[The estimated cost of production is estimated at between 2-$15 per barrel. I personally think it is probably around $5 because the oil fields and pipe line have been in production for many years]
1AKFOX, This is an interesting way of putting this. Could you be more specific about this?
[Ok]
Does the state actually set the price of royalty oil being sold to the refinery,
[Yes. See AS 38.05.183 for details and what goes into determining the royalty oil sale price - who does what and how. Subsection (e)]
the 1/8 Alaskan share at a price that is more then the world market going price of a barrel of, say Exxon, or Conoco oil coming down the same line?
[Not sure about your question. The royalty oil wholesale follows the OPEC price and has done so since day one. Ticker symbol BPT closely tracks the price of North Slope Crude relative to OPEC price. State royalty oil is mingled with oil company crude as it flows through the pipeline. I Understand much of the crude is made in to jet fuel and exported out of the state. Export must be terminated. The amount of oil available is finite.]
continued
Part 2
-----
Also are you suggesting that the state profiting from royalty oil is a bad thing?
[ABSOLUTELY! It is our property the state is selling at many times the production cost of 2-$15 and we are forced to buy it back at the marked up price. "Profiteering" is a better word?
The high price of oil has cause hyper inflation, destroying peoples ability to make ends meet, sense of security, and loosing their homes. Numerous local business have gone under and employees will demand increased wages to cover the cost of living]
Should the state not make any profit, in other words,give its share of oil to the refinery for free?
[Crude could be sold ie at zero mark up, however it would cause massive waste. When it at $20-30 per barrel the pump price was around $1.50 for diesel. #2 heating oil was around $1.10 and not 3.30 to 4.75. The price of energy oil- gas- electricity profoundly effects our ability to survive in this environment and to have any kind of "economic" development. Food prices are up 50% since last year. #2 fuel is up 3-4 times what it was 2 years 8 moths ago]
Would that make the pump price for heating oil drop in direct proportion statewide
[ it would reduce the price proportionaly and close to equalling what it was then the price of royalty crude was in the 20-$30$ Because of fraight to remote areas the price would be higher as it has always been. ]
, or would it give the refinery more room to price gouge?
[price gouging should be a felony in this state, business who gouge should loose their business license permanently.
As a contractual condition for the sale of royalty oil to the refineries at a reduced price -- they would be required to pass the price reduction along through the distribution chain or lose the contract. Meaning no royalty crude for you.
A 10 times windfall profits tax would help them have respect for the contract.]
I hope this was a useful response to your questions.
just asking - "bare" is talking about the kings new suit of clothes. "bear" means "to carry" as in "bearing arms" or "what the market will bear"
draconian - It has been long understood that water transport is the least expensive method of transporting bulk goods such as fuel oil; that is the way much, if not most,of rural Alaska, being situated on navigable rivers and coastline, receives its fuel. The problem is that our energy fuels are transported unneccesarily long distances. In some cases through the eight hundred mile long pipeline with tariff cost, then tankered to Washington State or California for refining, then tanker barged back around the AK peninsula and UP the river system. Don't you agree that it should be less expensive to refine the product on the upper reach of the river system and float it DOWN the river to it consumers with a road connecting to the Kuskokwim between Ruby and McGrath. Donlin Creek Mine would then have its fuel for the 40-50 megawatts it needs to supplement the 40 megawatts of wind power it plans to develop to supply the 80 megawatts it needs. The many gold mines in that area could also have less expensive power and many villages also.
Thanks AKFOX1, that clears what you were saying about the profits pretty well. I would be all for the state selling part of its royalty crude to the refineries for fuel oil to heat peoples homes at a reduced rate. Even GVEA could pass savings on. I would be less in favor of the state selling cheap crude that would be going for jet fuel to Eielson or some of the cargo carriers, or AK Air as that would be benefiting people other then Alaskans, something the state constitution prohibits. The problems I see with the state selling for less then market value would be how does one separate the crude that goes to heating oil versus jet fuel? I am sure there could be a way if the refineries would play ball but they don't seem too willing to open up their books as it is. How would we ever know how much cheap crude oil slated for heating oil would be subsidizing jet fuel prices for KC135's at Eielson, or more likely cheap jet fuel at Anchorage International for cargo carriers.
The refineries in Fairbanks were built for the sole purpose of suppling gasoline and heating fuel products to Fairbanks and Alaska.
Prior to their construction jet fuel was imported or shipped by pipeline to Eielson from Haines
"The problems I see with the state selling for less then market value would be how does one separate the crude that goes to heating oil versus jet fuel?"
This is a metering problem. Each barrel of crude when refined produces x amount of heating oil, x-amount of gasoline, x-amount of tar and assorted other products in including x amount of naphtha that GVEA burns.
North pole refineries must burn additional crude to generate heat for warming the crude to be distilled.
Because oil refining uses a distilling process where the crude is heated and cooled as it passes over separators where the different products condense.
1 barrel of crude burned to heat maybe 5(?) barrels for separation can run the product price plus they must buy power from GVEA.
The heating oil is made the same way they make whiskey.
crosswind from above
Points out heating oil could be distributed via the river system. So could natural gas products such as propane and CNG.
I am surprised dock facilities have NOT been built along the haul road river bridges to accommodate barge service up and down the river system.
--------
Our #1 political problem is the impact of the state selling our property at a price far above cost and it's effect on our standard of life.
Our #2 political problem is the only spine and set of gonads in this state are owned by Sarah.
Our local politicians have allowed this to go on for years while Anchorage enjoys state royalty natural gas at price below national wholesale price. That is why electricity down there is 10cents/kwh and 19.5 cents/kwh up here.
"This is a metering problem. Each barrel of crude when refined produces x amount of heating oil, x-amount of gasoline, x-amount of tar and assorted other products in including x amount of naphtha that GVEA burns."
Fox1
That makes sense, but! They can still sell fuel oil for whatever they want, regardless of what they pay for the crude. They are proving that right now. Until they open their books they are going to rip off Alaska for whatever they can. Otherwise the price would have dropped along with the lower 48. If we start selling crude to them for 20 a barrel what is to stop them from pocketing most of it. The only way it would work is if the state owned the refinery. Maybe Flint hills should go out of business like they were talking about earlier and the state could get in the business, just like that Mat-Maid dairy.
"The problem is that our energy fuels are transported unneccesarily long distances. In some cases through the eight hundred mile long pipeline with tariff cost, then tankered to Washington State or California for refining, then tanker barged back around the AK peninsula and UP the river system"
This system is nuts! Why can't we ship downriver from Nenana on Yutana barge or some other system to get fuel right from N.P. to the villages on the river? For that matter, why couldn't the state own a refinery and sell fuel oil and gasoline only to the state's residences? They could use their royalty oil and make the proceeds benefit us instead of Flint Hills. Let private enterprise sell to Eielson and the airlines. Oh, yeah I forgot... Socialism! Dang I really thought I was onto something! Sorry bush towns, 10 bucks a gallon is the best the system can do! You wouldn't want us to wake up and find we are socialist. Where would it end? Free health care? 2 dollar gas? YIKES!
I think the only way to adjust the fuel prices is to start a Co-Op with as many people as possible. Then we can import fuel from Washington and distribute it at a lower price. This will cause the market to self regulate, and the prices will fall accordingly. As it stands now there is a duopoly in place, and these two companies enjoy the profits they are making. As long as they agree amounst themselves to keep the prices high, we will continue to have to pay them. The only way to keep the prices at a reasonable rate without the worry of having a third party (company) raise the prices all over again is to start a Co-Op. Lets get off our arse and get one started.
Highest Regards.
Mark in Delta Jct., AK $4.63/gal Diesel
I say that the gas companies and car makers and the government are all guilty!!!!!!!!!!! First I think that corporations and government are very closely nit. The government gets support from corporations. If the government doesn't do what the corp says then all support stops. Where do Obama and McCain get support from, so they can tell us that they are going to fix it???? So the government and the corps are laughing all the way to the bank on our gas payments!! Its almost like a hidden greed tax only the gas companies are benifiting from it too.
Secondly Chevy built a car that ran on nothing but electricity called the EV1. What happened to it?? I heard that because the car needed a very simple transmission and no oil filters or radiators or oil pumps or, etc,... then the car was actualy so cost effecient for consumers that it was not making Chevy as much money as gas cars. So they canceled the leases of the cars and took them to a car recycling dump and got rid of them. Now Chevy's web site says that electric cars can only atcheive a 20 mile range at 35 miles per hour. That is a lie since Chevy was the one that built the EV1 (200 mile range @ 80 mph)that operated on our highways with gas traffic. Then chevy built the hummer right after they removed the EV1 from the martket.
Auto makers in France and Spain and India are making electric and air cars that can hold up to traffic speeds with gas cars!!!! I think that the government, the gas companies, and the auto makers are all guilty!!! They are all hiding behind the duopoly and antitrust. I think that gas prices are dropping because WE THE PEOPLE are getting pissed. Now they are telling us to have a nice day. They can kiss my,.....
Jim, Texas $2.39/gal
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