Pumping up the price of gas?

Study looks at trends in what Alaskans pay at pump

Tom Hall

PNA Staff Writer

Does it seem as if the recent increase in gas prices paralleled the increasing prices for Alaska North Slope crude? Did it seem as if gas prices came down a lot slower than crude prices in 1998? And are Alaska’s retail gasoline prices higher than the Lower 48? The short answer is that it depends on whom you talk to and what a ‘higher price’ actually is.

In a presentation to the International Association of Energy Economics on March 25, Dan Zobrist, a petroleum economist with the Alaska Department of Natural Resources, introduced preliminary results from a year-long study that suggest the above perceptions may at least be partially true.

Using data from the period 1990-1997, Zobrist concluded that when ANS crude prices increase by $1 a barrel (the equivalent of 2.4 cents per gallon), retail prices increase by 0.97 cents per gallon. But when crude prices decrease by the same amount, there is virtually no change (a decrease of just 0.06 cents per gallon) in the retail price.

As for comparisons of gasoline prices between Alaska and the Lower 48, the actual retail price comparison may be hidden by the difference in state fuel taxes. Zobrist told PNA, “When refiners say that prices are lower in Alaska (than in California), they are right. But.” he added, “when taxes are subtracted, and you calculate what the seller is receiving, Alaska is the highest (on average 28 to 38 percent higher).” At 8 cents per gallon, Alaska has the lowest motor fuels state tax in the nation.

Williams Alaska Petroleum Co. spokesman Jeff Cook told PNA that although he had received a copy of Zobrist’s findings late last week, he hasn’t had time to analyze the results. He did cite several influential factors — most notably the higher business costs in Alaska — that affect the price refineries, wholesalers and retailers charge to their customers. He also said that Zobrist’s study looks at average prices across the entire state which take into account all the remote communities in the state, and added that places with the lowest volume have the highest costs. “If the study focused only on Anchorage and Fairbanks, the story would be a lot different,” Cook stated.

Zobrist recognized and conceded this possibility in his findings. In the highlights from his report, he said, “This effect of increased prices and margins downstream may be the need to compensate for lower volumes of sales in the smaller Alaska market compared to the West Coast.”

A study, if possible, of just the two major metropolitan areas in Alaska might well yield entirely different results. In any event, the average Alaska consumer is probably grateful not to be paying California gasoline prices.