High oil prices a double-edged sword in Alaska

High world oil prices may be good news for the state’s coffers, but down at the consumer level, the impact is making life increasingly tough as the cost of heating homes, fueling automobiles and boats and transporting goods continues to rise.

The Alaska Department of Revenue's fall forecast predicted high prices during 2006, but declining production. Crude oil prices on the West Coast were projected at $57.30 per barrel in fiscal year 2006, which concludes June 30 — a 32 percent increase over 2005’s level of $43.43.

According to the Revenue Commissioner Bill Corbus, Alaska will receive about $4 billion from crude oil production activities in fiscal year 2006, with the general fund seeing $3.4 billion and the Alaska Permanent Fund the rest.

While lawmakers this session must decide how best to handle a $1.2 billion oil revenue surplus, the high cost of fuels is hitting consumers where it hurts.

Customers of Petro Marine Services, which sells heating oil in the Homer area, were paying $1.84 per gallon in early 2005. By 2006, however, the price had risen to $2.34 gallon, a 27 percent increase in one year, said company spokeswoman Candice Cornett.

Put another way, a 300 gallon fillup went from $552 to $702. Those prices have customers paying attention.

Some consumers play a waiting game, she said, sometimes buying just the minimum delivery amount — 100 gallons in town, 200 gallons out of town. They’re betting the price will drop over the time it takes to burn what they’ve bought.

“The weather has a lot to do with it,” Cornett said. “It was warm here for a while. Then the cold comes in and everybody buys again.”

An increasing number of Alaskans are finding it hard to pay the higher fuel costs, said Kathleen Dore, acting program coordinator for the state Heating Assistance Program, a part of the Department of Health and Social Services Division of Public Assistance.

“Applications (for state fuel-cost assistance) are up nearly 16 percent over last year at of the end of December,” Dore said. “Price has an awful lot to do with it.”

Last year, the state provided financial heating cost aid to a little over 9,000 Alaskans. Today, that figure is closer to 10,500. Dore did not have figures specific to the Kenai Peninsula.

High fuel prices are having an impact on the fishing industry.

“It affects everybody. Everybody’s operating costs go up,” said Don Lane, secretary of the North Pacific Fisheries Association.

Lane fishes a 60-foot boat out of Homer primarily for halibut. High fuel costs have led him and many of his colleagues to alter their fishing practices.

“It is safe to say fishermen are more careful about how they spend their time on their boats,” he said. “You just can’t go out and take a chance there might be a fish. You’ve got to have a pretty good idea you will be successful.”

Lane said fishermen have reconfigured their vessels to save money, going to more fuel-efficient engines and bulbous bows to cut down drag, and reducing the number of generator hours.

The high cost of fuel affects the entire economy, said Matt Berman, a professor of economics with the University of Alaska Anchorage.

“Take someone driving an SUV or a clunker and doing a lot of commuting,” Berman said. “Price has a lot of affect on what’s left to spend on other things.”

Nothing about the volatile price of oil is sure. However, the Revenue Department has forecast that Alaska North Slope crude oil prices would decline to $40.95 per barrel in fiscal year 2007, which begins July 1.

Prices might be expected to fall further to $25.50 per barrel in beyond 2008.

Thus, both the flood of revenue from elevated prices and the high price of fuel at the pump may be expected to fall in the not-too-distant future.