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As crude prices rise, so do prices at Peninsula pumps

Posted: Sunday, March 13, 2011

With gasoline prices topping $4 a gallon this week, words like "outrageous," "ridiculous" and "a rip off" filled the air at local gas stations as residents hesitantly filled up their tanks.

Photo By M. Scott Moon
Photo By M. Scott Moon
Gasoline prices on the Kenai Peninsula have jumped over the past weeks.

"I remember filling up my car for 20 bucks instead of 40," said Kalifornsky Beach area resident Jeramie Davis while pumping gas at the Holiday gas station in Kenai.

"To me it's pretty outrageous, especially how much we make a paycheck nowadays," the personal care assistant added. "Like people making the minimum wage at McDonald's. I don't see how they get by."

Krystal Richie, a certified nursing assistant living in Soldotna, said her family is going to have to start curbing gas consumption.

"Everybody's going to have to," she said. "They say it's going to be up to five by the end of this summer."

Richie, who was filling up her SUV in Kenai last week, said her family just bought a new truck to try and make a gallon go further.

"Its gas mileage is supposed to be better and it's not," she said. "It's going to be hard for us."

Over the last few months gasoline prices per gallon have surged -- along with the price per barrel of oil -- and it does not appear they will be falling anytime soon.

Scott Goldsmith, a professor of economics at the University of Alaska Anchorage, said the obvious reason for the swell in gasoline prices is because of political unrest in the Middle East.

"It's not necessarily that there's a shortage of crude oil, but the perception there might be in the future, and it raises it for the moment," he said.

He said that although there is no actual shortage of oil now, political problems in the region could potentially cut off oil supply, which could drive prices even higher.

"Whether things are going to cool off there or whether things are going to get worse, that's anybody's guess," he said. "I think we're in for at least a summer for high oil prices."

And high oil prices translate to high prices at the pump, which is a love/hate relationship for Alaskans.

"I think it's a rip-off," said Wasilla resident Maureen McNamara while getting gas in Kenai. "I just don't understand how the gas companies can have millions in profits each quarter and the gas price keeps going up."

Goldsmith said overall high prices for oil and gas are good for the state, even if the average consumer does not see the immediate advantage.

"The benefits of the high oil price outweigh the cost of the higher gasoline price," he said. "The high oil price is good for the oil industry, it stimulates their investment in looking for new oil, it also means higher taxes to state government, but the benefit of that is not as immediate to the average household."

Alyssa Shanks, a state-wide economist for the Alaska Department of Labor in Anchorage, said people rarely see the positive future correlation between oil and gas prices while filling up at the pump.

"We're really happy when we get our PFD check but that doesn't make it OK when we pay $50 or $60 to fill up our tank," she said.

It's also hard for other residents to understand why Alaskans pay more when oil and gas is produced in state.

"We produce oil here in Alaska and it seems like the price should be less. It doesn't make any sense," said Cal Ross of Nikiski.

Davis, the personal care assistant, had a similar thought.

"We get it (oil) out of the ground here in Alaska, same with our coal and stuff, and then we ship it somewhere else and then have it shipped back here for us to pay more for instead of just using it ourselves," he said.

But that's not how it works, explained Goldsmith, the economics professor.

"The price of gasoline in Alaska really depends on where the last barrel is coming from, or where the last gallon is coming from. The last gallon in Alaska usually comes from Seattle," he said. "The price no matter where you are in the state, it's not dependent on how close you are to the oil pipeline or how close you are to a refinery, it's driven by the price that's coming from Seattle."

And the cost of transporting that oil and gas from Seattle and throughout Alaska is what consumers see tacked on at the pump, Goldsmith said. It's really like a transportation tax. That's why gas prices are higher in Kenai than in Anchorage, and keep going up the farther you get on, and off, the road system.

"Gas prices, they really do effect everything," said Shanks.

She said when gas prices go up transportation prices go up which translates to the price of commodities.

"We definitely feel it in the price of goods, the price of food and that kind of thing," she said. "I hate to say we get hit twice, it really happens all over the country because goods are shipped in from other countries. Since we are even farther away we feel it even more."

The high price of gas and other goods is something that Goldsmith was concerned about as possibly harming national economic recovery.

"If consumers are having to spend more money on gasoline then they won't have as much left to spend on other things and that could slow down the recovery," he said. "There's a potentially negative effect on consumers and tourism, the fishing industry, plane flights, surcharges for fuel are going to be higher."

The exact impact gasoline prices will have on the economy this summer is still uncertain, but one Kenai resident was resigned to paying the price.

"People are going to drive. So as long as people drive they're going to keep jacking the prices up," said Gary Clemens, a salesman.

Brielle Schaeffer can be reached at brielle.schaeffer@peninsulaclarion.com.



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