Alaska editorial: Alaska needs better explanation for high gas prices in state

Oil duopoly takes advantage of the fact 'Alaskans must drive'

Posted: Thursday, February 12, 2009

Rep. Jay Ramras tried to have it both ways last week in his report on Alaska gasoline prices. While the House Judiciary Committee report acknowledges a growing gap in Alaska and Lower 48 prices in the last year, Rep. Ramras advises against any "heavy-handed" government intervention to lower those prices.

He said that while he didn't have actual figures, he intuited that Alaskans were paying at the pump for the peculiarities of our fuel market, that high gasoline prices are the price we pay for a lively jet fuel market that keeps airports busy and jobs filled in Anchorage and Fairbanks and in between. If refiners have to cut jet fuel prices to remain competitive, they need to make it up at the pump when you fill your pickup.

Ramras' report was critical of House and Senate bills that would require refiners to justify their margins when the prices of fuels was more than 10 percent higher than Washington state prices.

Mess with the retail markets, he warned, and we might lose the Tesoro and Flint Hills refineries, which supply that jet fuel as well as gasoline, diesel and other fuels.

At the same time, he wrote that the committee shared the cynicism of Alaskans about the high refiners' margin, the difference between what it costs refiners to produce gasoline and the price they charge retailers. That margin is why Alaskans pay so much more for gasoline than drivers in Washington state - as of Friday, about 42 cents per gallon more, and that's even more striking given that Alaskans pay 36 cents less per gallon in taxes than our brethren in Washington.

Rep. Ramras wrote: "There must be a better answer - somebody must be playing 'hide the ball.' But we could not find it." So the conclusion is that something is wrong here, but we don't know exactly what, and in any event it would be too risky to do anything about it other than build more storage capacity for rural Alaska.

We needed hearings for this?

Rep. Ramras may be trying to spike the gas pricing bills, but his conclusion makes a strong argument in favor of passage. He says he can't find the ball?

The bills require refiners to show us the ball.

Rep. Pete Petersen, sponsor of the gas price bill in the House, argues that his bill doesn't impose price controls but does require justification for higher costs - and that's justification beyond "what the market will bear." Devoted free marketeers might argue that what the market will bear is the fair price. But Tesoro and Flint Hills make a duopoly that takes advantage of the fact that "Alaskans must drive," as the Ramras report says.

We don't have the range of transportation alternatives most Lower 48 markets enjoy, so Alaskans can't cut their demand much when prices rise. And more competition is unlikely here for a variety of reasons. Small population and relative isolation preclude Alaska from the relief that is supposed to come from free market competition.

If jet fuel keeps so much of our economy running, and higher gasoline prices help subsidize those sales, then maybe those prices are justified. But the refiners should prove it. A lawmaker's intuition isn't enough.

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