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Lawmakers Search For Ways To Lower Energy Costs

By | July 11, 2012

Legislators began looking for ways to help lower energy costs for Alaskans on Wednesday, but they aren’t finding many options yet.

The Senate Energy Working Group Chairman Bill Wielechowski, an Anchorage Democrat, said the first of several anticipated hearings will address questions that frequently come up. He said Anchorage prices are 40-50 cents above prices in the Lower 48 – and that is curious in a place where nearly 600,000 barrels of crude oil are produced daily, where gasoline taxes are the lowest in the nation, and where there is little transportation cost for locally produced fuel.

Senator Bill Wielechowski

“In South Carolina for example, the average cost of gasoline today is $3.00. In Alaska it is $3.92 with prices in some communities as high as $10.00 a gallon. Yet not a drop of oil is produced in South Carolina and their gasoline takes are roughly double what our taxes are – 16.8-cents in South Carolina versus 8-cents here. The hope is that this discussion here this morning will shed some light on this,” Wielechowski said.

Lawmakers heard from Assistant Attorney General Ed Sniffen, who said the thought of government intervention is based on the public’s misperception of how those prices are set. He said the biggest price factor in Alaska is the small market size. He said the small number of customers and the small number of suppliers mean there is little competition. And that leaves the industry free to sell fuel at whatever price customers will pay.

“From a legal perspective, there is nothing illegal about that. It’s businesses trying to make money. And trying to draw a connection between the cost of a barrel of oil or what they’re selling fuel for in South Carolina or Texas or Washington or California and what fuel is selling for here – it’s interesting to look at, it’s informative and hopefully it’ll help us get to some solutions, but at the end of the day, it’s the competitive pressures on this market that ultimately set the price for our energy products,” Sniffen said.

Economist Barry Pulliam – with the California firm Econ-One – recognized other factors that contribute to high prices – such as transportation costs and the lack of storage facilities in many communities – but he said the legislature’s best direction is to come up with ways that encourage competition on the statewide level.

The Working Group plans future hearings on other energy-related issues and is authorized to contract for a study on the effect of energy prices in the state.

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