Skip to main Content
Alaska News

Lawmaker seeks investigation into Alaska's high gasoline prices

  • Author: Alex DeMarban
  • Updated: July 7, 2016
  • Published January 13, 2016

Gasoline prices have plummeted across the U.S. but the monthly average has recently begun to drift upward in Alaska, prompting allegations from a lawmaker that the state's only gasoline refiner is manipulating prices — first down, in response to political pressure, then up when the pressure abated.

Such complaints are nothing new in a state that regularly has some of the nation's highest prices at the pump despite its abundant oil production and the lowest gasoline taxes in the country.

Multiple state investigations over the years have found no illegal activity among refiners, distributors and sellers. Instead, the reviews have blamed forces such as limited demand in a tiny market and a lack of refiners.

But Democratic Sen. Bill Wielechowski -- who wants an attorney general investigation of potential antitrust issues -- believes things have changed.

He said the potential for price gouging has grown now that the state has just one in-state gasoline refiner, Tesoro Alaska, following the closure of Flint Hills Resources' North Pole refinery in 2014.

"They can charge whatever they want," Wielechowski said.

Matt Gill, manager of external affairs at Tesoro Alaska, said the company has been aware of Wielechowski's call for an investigation. But Gill denied the allegation that the company is manipulating prices.

He said price changes have multiple causes, including the dramatic drop in the price of crude oil last fall that led to steeply lower prices at the pump in Alaska, and a "correction" following that drop causing a recent uptick. Refinery problems can also be another issue of many.

"The price of crude is just one of many factors," Gill said.

The national average price of regular gasoline has plunged to multiyear lows, hitting $1.95 on Wednesday, according to the American Automobile Association. The recent drop below $2 was the first since 2009.

In Alaska on Wednesday, it was $2.51 a gallon, the nation's third highest behind California's $2.83 and Hawaii's $2.67. (The averages are based on credit card swipes and largely reflect Alaska's prices along its highway system. Off the road system in Alaska, it's even higher.)

Low oil prices can be positive for companies in the refining business. The low price of crude oil, the main raw ingredient in refining, can lead to increased demand for gasoline. Tesoro Corp., headquartered in San Antonio, Texas, posted record net earnings of $759 million in the third quarter of 2015.

Wielechowski said Alaska's price fluctuations are apparently tied to his request for an attorney general investigation into the high petroleum prices. That request was recently denied, though the senator has renewed it this week.

Wielechowski initially asked for an investigation in a letter to the governor and attorney general on Sept. 9. He said gasoline prices should not be so high in Alaska in part because the North Slope crude price has plummeted; oil production has risen in Cook Inlet, providing less need to import crude; and a tax credit for refiners approved by the Legislature in 2014 is now available to help Tesoro Alaska with expenses.

AAA statistics show that in September, Alaska's monthly averages for gasoline dropped sharply -- much faster than the national average -- after holding steady at about $3.45 a gallon in July and August.

In August, the state's average monthly gasoline prices were 86 cents higher than the U.S. average. In November, the difference was 27 cents.

Gov. Bill Walker denied the request for an investigation in a Dec. 21 letter to Wielechowski. He said that in Southcentral Alaska, "prices have fallen dramatically since September," and added that Alaska price fluctuations typically lag behind those in other states.

"The average price for gasoline in Anchorage is about $2.23 today -- about 10 cents lower than the West Coast average," Walker said, citing statistics from the Energy Information Administration.

Walker's letter said a 2008 investigation by the attorney general's office reported that the state does not regulate petroleum prices. Companies can set a price the market will pay but cannot engage in collusion leading to price-fixing or efforts to drive competitors out of the market.

The letter concluded that it would not "be a good use of very strained state resources to conduct an expensive gasoline pricing investigation when no evidence of price fixing or other illegal antitrust activity was found in the 2008 investigation."

Since the governor's denial, prices are up. The average Alaska price for January was $2.47 a gallon as of Tuesday, up six cents from December, said Michael Green, AAA's public relations director.

Walker said in a prepared statement Wednesday that no one in his office had communicated with Tesoro officials about Wielechowski's request. The governor said as far as he knows, politics plays no role in gasoline pricing.

On Wednesday, Wielechowski sent a letter to Attorney General Craig Richards renewing the call for an investigation. A new factor is Tesoro's plan to buy two Flint Hills Resources terminals in Alaska as well as other assets, a move that would allow Tesoro to expand its presence in Alaska and increase its access to the state's Interior.

The acquisition of storage tanks will give Tesoro "total control" over gasoline prices in Alaska, raising antitrust concerns that should be investigated, Wielechowski said. The deal will further prevent competition in the state and will lead to higher gasoline prices, he said.

A state Department of Law spokesperson said the department would not comment on the proposed deal.

Gill said the terminals Tesoro plans to buy will be open to other companies, and prices for using them will be market-based and set by a Tesoro subsidiary.

The deal was expected to close sometime this month. Gill said Tesoro is responding to questions from the attorney general's office related to competition.

"We are answering some questions the attorney general had, but we are still looking to close that as soon as possible," he said.

For more newsletters click here

Local news matters.

Support independent, local journalism in Alaska.