Senator Murkowski fights for lower gas prices at a press conference.
Gas prices and Alaska
Many of you have contacted me to express concern about the fact that gas prices remain high in Alaska despite decreases in the price of oil. I wanted to take this opportunity to explain my understanding as to why gasoline prices tend to be higher and decrease more slowly than in the Lower 48, despite the presence of crude oil and refineries in our State.
While it would seem that gasoline should be cheaper in Alaska since it is closer to the source of raw crude oil, the unfortunate fact is that Alaska’s three refineries do not enjoy the economies of scale that larger refineries in the Lower 48 do. In other words, since Alaska’s refineries don’t produce enormous amounts of gasoline like Lower 48 refineries do, it isn’t as cost-effective to produce. In addition, Alaskan wage rates are higher because of the higher cost of living, and shipping and construction costs are considerably higher than in the Lower 48. Therefore, Alaskan refineries have never been able to sell refined gasoline as cheaply as in some other American locations.
I understand the frustration of many Alaskans who pay higher fuel prices in a State that supplies America with 13 percent of its oil production. Over the years, there have been several Alaska Attorney General and Federal Trade Commission investigations into allegations of price gouging nationwide. To my knowledge, none of those investigations have ever uncovered evidence of price fixing or price gouging in the setting of Alaska fuel prices. If prices do not begin to go down in Alaska soon, however, I plan to request that a new investigation be conducted to determine why gas prices in Alaska remain high when gas prices around the Nation are slowly decreasing.
Gas prices and the Nation
We are all aware that oil prices and gasoline prices have been regularly breaking record highs, with the rising cost of all types of fuel causing an extreme hardship for Americans and particularly Alaskans. In May 2008, Alaska became the first State in the Union to have the average gas price reach $4.00 per gallon. For families and businesses on tight budgets, adjusting to the extreme rise in fuel costs is proving difficult or impossible.
Since much of the rise in prices can be attributed to increasing global demand and tightening global supplies of oil and fuel, I believe it is essential for Congress to act to increase supplies and decrease demand, both of which will help lower the price of fuel.
In order to move towards this goal, I introduced a bill this winter that would open a small portion of the Arctic National Wildlife Refuge’s (ANWR) coastal plain to oil and gas development if the price of oil reached $125 per barrel, designating half of the estimated $300 billion in federal revenues to alternative energy research, with the other half going to weatherization and low-income home energy assistance (LIHEAP). This bill would attack the problem from both sides; opening ANWR would increase oil supplies, and advancing renewable energy and weatherization would decrease oil demand.
Later in the spring as the price of oil broke the $130 per barrel level I joined with 18 other Republican Senators in introducing S. 2958, the American Energy Production Act of 2008. This bill, a comprehensive solution to our energy crisis, also would open ANWR’s coastal plain to oil development, but also make it easier for states to permit drilling for oil in the Outer Continental Shelf (OCS), and allow states to share some of the revenue from OCS drilling, including Alaska. This legislation would also make it easier to produce energy from the oil shales in Colorado, Wyoming and Utah, and establish a mandate for clean-coal derived fuels. In addition, it would repeal the new permitting fee for applications to drill for oil and suspended the filling of the Strategic Petroleum Reserve (SPR) for six months because of the oil’s high current value. Lastly, the bill also would establish a loan and grant program to develop batteries for future, high-efficiency plug-in hybrid cars and promote biomass and biofuel development. While neither bill has yet passed, I continue to work to convince my colleagues that increasing domestic supplies is vital to put downward pressure on energy prices.
Currently, the only energy aid program Congress has established is the needs-based Low Income Home Energy Assistance (LIHEAP) program that provides aid to residents whose income is at or below 150 percent of the federally defined poverty level. That program provides about 13,880 qualified Alaskan households about $730 a year to buy fuel. That is only enough to cover about one winter month’s supply of fuel for a typical home at current prices. This is one of the reasons why I introduced my first ANWR bill, since it would use federal ANWR revenues to provide significant increases in LIHEAP aid.
In 2007 we took initial steps in a comprehensive energy bill to decrease energy demand over the long term and increase energy efficiency. This legislation increased fuel economy standards for vehicles in the future, established a renewable fuel standard, and authorized hundreds of millions of dollars toward renewable energy demonstration projects, research, and development.
Congress this spring has taken some action – not nearly enough – to increase supplies to lower fuel prices. We suspended oil deliveries to the Strategic Petroleum Reserve to free up 76,000 barrels for the U.S. market and encouraged the federal government, the nation’s single largest user of fuel, to voluntarily conserve.
I continue to search for other solution. In late June I co-sponsored legislation to add more investigators and provide greater powers to the Commodities Futures Trading Commission to make sure market speculation is not contributing to oil price hikes. I also am working with Senator Stevens on other Alaska-specific legislation to help reduce fuel prices. I will continue to search for creative solutions to help ease Alaskans’ pain at the gas pump.
