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Lack of competition keeps Alaska gas costly

  • Author:
  • Updated: September 27, 2016
  • Published June 29, 2012

Every Alaskan knows the feeling. You see a commercial on TV advertising a great new deal, but in small print at the bottom of the screen, "except in Alaska or Hawaii." Many Alaskans accept this as a cost of living in our great state. But there is one area where this shouldn't apply and that's gasoline prices.

On June 21, the average cost of gas in Anchorage was $4.10. The average cost across the U.S. was $3.49. The state with the lowest average was South Carolina, where drivers paid $3.01 to fill up.

That means Anchorage drivers are paying 61 cents more than the national average and $1.09 more than a state where there is very little, if any, oil production. The story for the rest of Alaska is even worse, with some communities paying up to $10 per gallon.

You've heard the pile of excuses why our gas prices are the highest in the nation. It has to be refined elsewhere and shipped back to the state at great expense, our gas taxes are too high, and the state has limited infrastructure to store and move gas.

But if you dig deeper, you'll find that many of those excuses are simply not true. The gasoline used in Southcentral Alaska is produced locally at the Tesoro refinery in Nikiski. It has a very short distance to travel, resulting in minimal transportation costs. And Alaska has the lowest gas taxes in the nation.

For example, state gas taxes and fees are 49 cents a gallon in New York, 48 cents a gallon in California and 37 cents a gallon in Washington. In Alaska, we pay 8 cents a gallon. Yet, all of these states have lower gas prices than we do.

While prices in Alaska are certainly affected by the small size of our market and the higher costs of doing business here, the difference between Alaska and the Lower 48 is clearly excessive. It is far greater today than it has been historically and there is no justifiable reason for this.

For years, Alaska's refinery margin (the difference between the wholesale price of gasoline in Alaska and the spot price of Alaska North Slope crude) was about 12 cents higher than the national average. But that has increased wildly. In October 2008, the last year for which this information was compiled, that difference was more than $1.40 per gallon.

The simple truth is that Alaskans are being gouged because of lack of competition.

We've tried legislation banning gouging, which dozens of states have done. This would have a significant impact but the bills died after heavy industry lobbying. So now we're going to focus on different ways to ease Alaskans' pain at the pump.

Recently, the Senate Finance Committee approved my request for $150,000 to hire an expert to figure out ways to get our gas prices down. We will be conducting hearings this summer and fall to see what we can do. We will investigate other approaches, such as attracting new suppliers to increase competition and creating more gasoline storage in the 49th state.

One idea is to have the Alaska Industrial Development and Export Authority build new gasoline storage capacity to enable Outside refiners to bring their lower-cost gasoline into Alaska. The cost of these facilities would be paid off by companies storing gas.

Another idea I've heard is to regulate the prices gasoline refiners in Alaska can charge, just as we do Chugach Electric, Municipal Light and Power and other companies that supply critical commodities and don't have competition. This strategy would only be employed if prices are deemed to be excessive and evidence shows there's no alternative.

I am great supporter of private enterprise and appreciate that Alaska has in-state refineries.

But, as Alaskans, we need to come together to find a solution that brings our state back into line with the rest of the nation. It's time Alaskans get a fair shake at the pump.

I look forward to hearing any suggestions you may have. Please contact me at my Anchorage office at 269-0120 or by email at Senator_Bill_Wielechowski@legis.state.ak.us.

Sen. Bill Wielechowski is vice-chair of the Senate Resources Committee and represents East Anchorage.

By SEN. BILL WIELECHOWSKI

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