Alaska oil is far less important to West Coast refineries than it once was, Alaska economist Ed King said in the first article of a three-part series about how the pricing of Alaska North Slope oil works.
The article, released May 4 and published by King Economic Group, deals with the fundamentals of supply and demand in the physical market.
While Alaska once contributed a significant share of supply to the West Coast market, it now meets only about a fifth of refinery needs, King said.
Declining production from Alaska and California has pushed the refineries to meet most of their demand by importing from other countries, he said, adding, “Given the nature of the supply chain, it is more likely that refineries cut back on imported cargoes (purchased as needed) than Alaska supply (purchased on long-term contract).”
Competition from foreign oil does affect the pricing in the Alaska oil contracts however, he said.
The lion’s share of Alaska crude is sold in three refining centers - Anacortes, San Francisco, and Long Beach - that satisfy the needs of Washington, Oregon, California, Arizona and Nevada, King said. Five of the refineries are in Washington state and 15 are in California.
Transportation takes a slice of salesFeeder pipelines moving the oil to Prudhoe Bay on average cost 60 cents per barrel to operate, although tariffs range from 25 cents to nearly $20 per barrel, King said. The 800-mile Trans-Alaska Pipeline System tariffs add an average cost of about $5.50 per barrel.
“The average cost of shipping oil from Valdez to the West Coast is about $3.50 per barrel,” King said. “That pays for the fuel, labor, and overhead required to operate, load, and unload a very large crude carrier.”
King’s entire report can be found at: https://kingeconomicsgroup.com/pricing-ans-part-1-physical-market-dynamics/
- STEVE SUTHERLIN
Norum takes gavel as new ATA presidentOn May 1 Josh Norum of Sourdough Express was passed the gavel to become the 2020-2021 president of the Alaska Trucking Association. The outgoing president is Jamie Benson of Federal Express.
“I have been a part of this group for six years now and am proud to be able to serve on an organization that has been a much needed advocate for the trucking industry,” Norum said. “I am the fifth member of my family to be the ATA president - my Great Uncle Gene Rogge (1959-1960), Great Grandpa Leo Schlotfeldt (1963-1964), Grandpa Whitey Gregory (1982-1983) and Uncle Jeff Gregory (1999-2000).”
Sourdough Express, which operates facilities in Anchorage and Fairbanks, is a fourth generation family organization. Since 1898, it has been servicing the commercial freight needs of Alaskan businesses throughout the state including the oil and gas industry.
ATA is celebrating its 60th anniversary this year. From its inception, the organization’s goal has been straightforward - to foster and promote the interests of the trucking industry in Alaska.
Among other things, ATA works to promote highway and driver safety, influence government and regulatory agencies, boost the industry’s image, and provide education and information about the industry.
- KAY CASHMAN