Once again, geopolitical issues have led to a spike in the price of crude oil — North Slope Crude hit $124 a barrel this week — which has led many analysts to predict prices at the pump will hit $5 a gallon in the near future.
Closer to home, here in Alaska we continue to face a conundrum over gas prices: oil is produced and refined here, yet we consistently pay higher prices at the pump than the rest of the nation. It’s a situation that gives rise to plenty of theories, most of which center around oil company conspiracies to gouge the consumer.
In early 2009, the Alaska attorney general’s office investigated gas prices in the state and found no evidence of illegal price-fixing among sellers. Its report cited market conditions specific to Alaska for causing gas prices to stay high.
Even closer to home, one of the biggest gripes is the difference in price at the pump between the Kenai Peninsula and Anchorage. Certainly, there are economies of scale and other factors, but one of the biggest factors to keep in mind is that there is a sales tax collected on the Peninsula, while no sales tax is collected in the big city. Ask any local merchant; sales tax — and the competition with merchants who don’t have to charge it — is a big deal for local business.
Don’t get us wrong — we’re not at this point arguing for a cut to the sales tax. Sales tax revenues are an important part of Peninsula municipal budgets. Steady sales tax revenue keeps property taxes low, and the sales tax collected by the borough is dedicated to education, certainly a priority in our book.
Our intent is simply to point out the biggest factor in the difference in prices at the pump, to dispel the myth that it’s entirely an oil company conspiracy. If you do the math, it comes out like this: If you buy gas within city limits, you pay 6 percent in sales tax (3 percent to the borough, 3 percent to Soldotna or Kenai). At $4 per gallon, that 6 percent works out to 24 cents per gallon, which is usually about the difference in price between the Peninsula and Anchorage.
There may not be much we can do to change the geopolitical situation, but with the possibility of $5 a gallon gas on the horizon, there are some things we can do to soften the blow.
First and foremost is conservation. Obviously, newer, technologically advanced vehicles will get better gas mileage than an old clunker. If your vehicle gets 18 miles per gallon, at $5 per gallon, that’s roughly 28 cents a mile. If a new set of spark plugs, clean filters, a well-tuned engine and properly inflated tires can make your vehicle more efficient — say 20 miles per gallon — your average cost per mile drops to 25 cents a mile. If you drive 1,000 miles a month, the savings is $30. It may not sound like much, but it adds up — and depending on your vehicle, a good mechanic may very well be able to squeeze more than just a 2-mile-per-gallon improvement out of your ride.
While we’re doing the math, it wouldn’t hurt to budget a little more for gas money into our summer plans. And another obvious way to conserve is by driving less. If you can, consolidate all those errands into one trip. Set up a carpool with your coworkers, or the parents of your childrens’ classmates if they regularly get a ride. And it may still be a little wintery for most of us to consider at the moment, but as things warm up, think about bicycling or walking to work. In fact, there’s a new local cycling club forming, and plans for bike-to-work week are in the works.
Prices at the pump likely will continue to be a sore spot for Alaskans for the foreseeable future. Planning ahead, with the family budget, vehicle maintenance and potential efficiency measures, will make it a little easier to ride out the anticipated increase in price.