Small market, high costs blamed for keeping Alaska gasoline prices up

Posted: Tuesday, November 27, 2001

ANCHORAGE (AP) -- Alaska's gasoline prices are not dropping at an equal pace with falling crude prices.

Local refiners and retailers blame the state's small market and high costs that they say contribute to higher prices than those in the Lower 48.

Oil prices, at $16 a barrel, are about half the price of a year ago. Nationwide, gasoline prices are down 24 percent in the past year. Anchorage prices have fallen a more modest 15 percent to about $1.40 a gallon.

''There's a lot that enters into it,'' Jeff Cook, spokesman for Williams Alaska, told the Anchorage Daily News. He said the market, the limited number of refiners and gasoline wholesalers and seasonal shifts in demand could slow price movements as oil prices fall.

''It's a supply and demand thing. What's important is prices are heading down,'' he said.

But investigators with the state attorney general's office say the lag between Lower 48 prices and Alaska prices underlines the concentrated nature of the Alaska gasoline market. In 1999, the state launched an investigation of the state's high gasoline prices. Investigators call it the ''Alaska Paradox,'' the curiosity of how 5/8429:0:2;4:4:4270:4779143329:74634262917:62069740;206773:4217:7:99443429:30976472894129?''Prices here are higher than you would see in a truly competitive market,'' said assistant attorney general Jack Griffin. He said investigators are looking for evidence of secret agreements among the state's gasoline wholesalers to divide the market and set prices. The companies have denied any wrongdoing.

Tesoro's refinery in Nikiski and Williams' North Pole refinery produce almost all the gasoline consumed in Interior and Southcentral Alaska. The two refiners are among four gasoline wholesalers in the state. Both also have many gas stations.

Compared to other oil-rich regions in the nation, Alaska's prices are high. In Houston, regular unleaded is selling for $1.06 per gallon, according to the American Automobile Association. In Oklahoma City, gas costs $1.01 a gallon.

But those areas also have large, concentrated populations and low-cost refineries to process their oil.

Alaska is far-flung. About 1 million barrels of oil a day flows through the trans-Alaska oil pipeline to Valdez, where it is loaded onto tankers for West Coast markets.

Williams' refinery, which sits next to the pipeline in North Pole, produces about 6,000 barrels of gasoline a day, Cook said.

Compared to a refinery on the Gulf of Mexico coast, processing costs at the Williams refinery are 46 percent higher for things such as electricity, labor and fuel, Cook said.

Cook also cited the high transportation costs of moving fuel from Fairbanks to Anchorage and other markets.

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