Anchorage Daily News

State legislators are gearing up to join Gov. Sarah Palin in investigating why gasoline prices remain high in Alaska.

House Speaker John Harris, R-Valdez, on Friday sent a letter to Fairbanks Republican Rep. Jay Ramras, who chairs the House Judiciary Committee, asking him to open an investigation.

Harris asked Ramras to examine specifically why prices aren't falling as fast at Alaska gas pumps as they are elsewhere in the country.

"It just doesn't make sense to me -- and to other Alaskan consumers -- that when the price of crude oil goes up, the price at the pump goes up, too, right away. Yet, when the price of crude goes down, the price at the pump is a lot slower to drop," Harris said.

He said the average gasoline price in the Lower 48 is $3.68 a gallon compared with $4.50-plus in Alaska.

The call for an investigation comes as Alaskans are about to receive a break on fuel costs courtesy of state lawmakers, who this summer passed Palin's idea of dropping the state's motor fuel taxes as part of an energy relief package.

The tax break, which starts Monday and will last a year, will eliminate the 8-cent tax per gallon of gasoline. Taxes on fuel used in boats and planes also will be suspended.

Consumers might not see the 8-cent tax break immediately. It will kick in only after retailers clear inventory and start selling tax-free fuel from their suppliers, said Ed Sniffen, a state assistant attorney general who specializes in consumer protection.

Retailers also are on the honor system to pass along the tax break to consumers, he said.

Alaska's paradox is that it has America's two largest oil fields in Prudhoe Bay and Kuparuk, low gas taxes and local refineries that can make most of the gasoline and other fuel Alaska consumers need. Yet its gasoline prices are the nation's highest.

Earlier this month, Democratic lawmakers and Gov. Palin asked Attorney General Talis Colberg to look into gas prices, and that investigation has begun, said Sniffen, who is leading the probe.

"It's really looking fishy to me," he said of recent gasoline price trends.

Over the past 10 years, Anchorage gas prices have risen and fallen pretty much in line with the Seattle price and the U.S. average, he said.

But that's not been the case since June 1, Sniffen said. Since then, prices out of state have dropped significantly.

The investigation, he said, is focusing on "just a general concern that, hey, prices are dropping everywhere like a rock. How come they're not dropping here?"

The state has hired a prominent petroleum economist, Barry Pulliam of the Los Angeles consulting firm Econ One, to help with the investigation, and might issue a formal demand for records from refiners and others, Sniffen said.

"That's fine. We wish them the best. We'll help," Kip Knudson, spokesman for Tesoro Alaska Co., said of the state investigations. Tesoro makes much of the state's gasoline at its Nikiski refinery, and it owns or supplies dozens of gas stations.

Investigators are likely to find the high prices are the result of market forces, Knudson said.

As for why Alaska prices aren't dropping as fast as in the Lower 48, he said Alaska is a small market and "smaller markets tend to be slower in response."

Sniffen said that could be because competition isn't as intense here as Outside.

"There's never an incentive to drop prices unless your competitors are dropping prices," he said.

Alaska investigated high gas prices before. An investigation concluded in 2002 by the administration of former Gov. Tony Knowles found no antitrust violations, Sniffen said.

The state of Washington also investigated high gas prices recently, concluding in April that fuel supply and transportation costs, increasing worldwide demand for oil and refinery crunches influenced prices at the pump -- not illegal price manipulation.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

Gas prices in Anchorage

Average prices Yesterday$4.31

Week ago$4.33

Month ago$4.41

Year ago$2.88

Lowest prices of regular gasoline posted on www.anchoragegasprices.com as of Friday:

PriceStation

$4.26Costco and Carrs (Huffman Park Drive)

$4.27Chevron (Old Seward Highway and Dimond Boulevard)

Illustration by DAVE SEYMOUR / McClatchy-Tribune

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