University study sheds light on soaring oil prices in rural Alaska

Posted: Sunday, June 08, 2008

FAIRBANKS - A study by the University of Alaska Anchorage helps explain why rural Alaska villages are paying exorbitant prices for home heating oil.

The study by the university's Institute of Social and Economic Research was conducted for the Alaska Energy Authority, which wants to find ways to hold down future energy prices.

Researchers identified 10 communities that vary in population, are geographically diverse and obtain and store fuel in different ways. Factors including transportation mode, competition, storage capacity and the condition of docks and fuel-handling equipment have more influence on consumer costs than oil prices at any given time, according to researchers.

The analysis began in November and the figures already are out-of-date with energy costs continually rising. Crude oil cost about $80 per barrel in November, compared to a mid-May price of $120.

"Everything has completely changed," said ISER research associate Meghan Wilson. She said the situation has become worsened in a number of the communities studied.

Interior villages studied were Fort Yukon, Alatna and Allakaket, with the latter two studied together because they are neighboring communities on opposite sides of the Koyukuk River.

Alatna and Allakaket registered the second-highest prices for fuel oil at $5.50 per gallon. Costs to fly fuel from Fairbanks and low storage capacity keep the prices high, researchers said.

Fuel oil is delivered on barges 400 miles from Nenana to Fort Yukon and stored for distribution throughout the region, according to research associate Nick Szymoniak. He said a generous storage capacity - about 660,000 gallons - helps make fuel oil more affordable and offsets the high cost of barge transportation.

Until recently, Fort Yukon retailers were selling fuel obtained last summer, Szymoniak said. New shipments will cost at least $1 more per gallon in refined fuel costs - and that doesn't include transportation increases, he said. Alatna and Allakaket, whose fuel is flown in, will likely see even greater increases.

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