Alaska News

State senator calls for gas price regulation

A state senator says Alaska oil refineries have been gouging Alaskans at the gas pump for more than a year, reaping profit margins unparalleled to ones in the Lower 48, and he is once again calling for government to step in.

The state's oil refineries are making far more profit on their gasoline as the national average, according to the report released Wednesday by Sen. Bill Wielechowski and authored by the nonpartisan Legislative Research Services Division.

But not everyone -- including the refineries and at least one legislator -- agrees with Wielechowski's conclusions, calling them an oversimplification of complicated market forces unique to Alaska.

Wielechowski, an Anchorage Democrat, said the costs at the pump are "having a huge impact on Alaskans. ... So we can put more money and profit into the pockets of the refineries."

He estimates that for every gallon Alaskans pump into their cars, they are paying 54 cents on average more to the refineries than what Lower 48 consumers pay. It has cost Alaskans at least $189 million in excess charges since Alaska gasoline prices soared above U.S. prices in 2008, he estimates.

Alaska has just two gasoline refineries -- Tesoro in Nikiski and Flint Hills in North Pole. Tesoro provides gas to roughly 80 percent of the Alaska market.

Wielechowski says that since 2004 the in-state refineries were on track with national margins, but that changed after the oil spike in 2008. After the spike subsided later that year, when gas prices dropped, Alaska refineries kept up their margins at the expense of consumers, he said.

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In October 2008, Alaska refineries' gasoline margin peaked at $1.45 per gallon, the legislative research shows. In that same month, the average U.S. refinery's margin on gas was 38 cents a gallon, the report says.

The Alaska attorney general's office investigated the state's gas prices and in February said it found no evidence of illegal price-fixing among sellers. Its report cited market conditions peculiar to Alaska for causing gas prices to remain elevated while pump prices in other states dropped. The attorney general's office performed a similar inquiry and came to a similar conclusion in 2002.

"Two attorney generals over the last decade have concluded that the gasoline market in Alaska is functioning properly," said Kip Knudson, Alaska spokesman for Tesoro. "It's not possible to price gouge in a functioning market."

"If we are making so much money, why is one refinery in trouble and why aren't more people building refineries? Or opening tank farms to store and sell gasoline?" Knudson said, referring to the beleaguered Flint Hills in the Interior. "It's complicated and risky and not nearly as lucrative as the senator maintains."

Flint Hills Resources declined to comment for this story. Company spokesman Jeff Cook said he hadn't looked at the report.

During the legislative session this year, several bills were introduced to challenge the price at the pump. A House bill didn't make it far. The Senate bill made it through several committees but then stalled, because of the assurances of the oil refineries that prices would stabilize, Wielechowski said.

"We were assured by a Tesoro representative that Alaskan gasoline prices were merely lagging behind those of the Lower 48, and that they would soon come down," Wielechowski said Wednesday. The new research shows "that the refiners have continued to jack up the price of gas, even when the price of crude oil has gone down."

Wielechowski wants state lawmakers to pass a bill to cap the refineries' margins at 10 percent higher than what is charged in Washington state, which Alaska has historically been very close to in price.

But Rep. Jay Ramras, R-Fairbanks, doesn't agree that gas prices should be regulated. He agrees Alaska gas prices are "eye-popping" and calls the refineries' business practices "disappointing corporate behavior" -- but it's not price gouging, he said. He said the new report is not looking at fair comparisons because it doesn't account for Lower 48 refineries "dumping" gas at below cost because demand has plunged in part thanks to the recession.

"The difficulty with a heavy-handed government coming in to regulate prices is that it looks good on the way in but tends to hurt consumers," he said. "Government is not agile. It is large, clumsy and generally destructive when it tries to involve itself in price regulation."

Alaska had the highest gas prices in the nation on Wednesday, according to the American Automobile Association. According to the Web site on Wednesday, the average price per gallon in Alaska was $3.39. The only other state paying, on average, more than $3 a gallon was Hawaii, at $3.30 a gallon. The average in Anchorage was $3.28.

Find Megan Holland online at adn.com/contact/mholland or call 257-4343.

By MEGAN HOLLAND

mholland@adn.com

Megan Holland

Megan Holland is a former reporter for the Anchorage Daily News.

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