Alaska editorial: State's frustration with high gas costs doesn't justify controlling prices

Posted: Sunday, January 25, 2009

Frustration with high gasoline prices doesn't justify a state law that would control those prices. That's not a business the state wants to enter, and doing so could have dangerous consequences for Alaska.

State Rep. Scott Kawasaki, D-Fairbanks, has introduced legislation that would cap gasoline, diesel and heating fuel prices at no more than 10 percent above Washington state prices. On a purely theoretical level, that seems like a reasonable markup that could cover whatever higher costs the fuel production and distribution system in Alaska might have. Of course, even a 10-percent markup seems out of line to many people in Fairbanks, given that the refinery in North Pole is fed by the first tap on the trans-Alaska pipeline and so its transportation costs ought to be about as low as anywhere in the nation.

It's a huge leap, though, from expressing our theories at the kitchen table to forcing them upon private businesses. This country, for the most part, has abstained from government price controls for good reason.

One of the greatest risks of such controls is that they will simply drive business out of business. That's not a risk the state should take with Interior Alaska's fuel production and distribution system.

Flint Hills Alaska, which owns the refinery in North Pole, already has said something must change to improve the viability of the North Pole plant or the company could sell or close it. A price cap on fuels probably isn't the kind of change they had in mind. Even if gasoline, diesel and heating fuel aren't its primary products (jet fuel is), putting a cap on such fuel prices could hurt the plant's overall viability.

Alaska's high fuel prices are extremely harmful to the average Alaskan, particularly those in rural areas. But if big profits could be earned by undercutting Alaska refineries' prices, it seems likely that Outside companies would be giving it a try.

Actually, gasoline from Outside refineries does supply Southeast Alaska's gas stations, but - isn't this curious - prices there are even more expensive than in the Interior.

This indicates that perhaps our kitchen table theories are missing something. We should keep that in mind before we start adopting drastic measures that would harm our in-state industry.



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