Lawmakers Clash over Alleged "Price Gouging" on the Part of Alaska Refiners

JUNEAU, Alaska — Alaska has the lowest gasoline taxes in the country -- just 8 cents a gallon.
Yet -- despite our exceptionally low taxes -- we pay the second highest prices at the pump of any state in the Union.
Only those heavily-taxed Californians pay more than we do.
So why is that?
Alaska State Senator Bill Wielechowski (D) Anchorage thinks he has the answer. He says Alaskan Oil Refineries are price-gouging.
On Tuesday -- at a hearing of the Senate Labor and Commerce Committee --- Wilechowski testified about alleged price gouging by Alaskan refiners.
He pointed out that until 2008, there was only a 12-cent differential between the price of gas in Alaska -- and the average price in the Lower-48.
Then, mysteriously, in 2008 that suddenly changed. At a time when the price of a barrel of oil skyrocketed all over the world, prices at the pump skyrocketed too. But they shot-up much higher here in Alaska than they did in the rest of the country -- and Alaska prices have never settled down to the 12 cent differential ever since. In fact today, gasoline prices in Alaska are 43 cents-a-gallon higher than in the Lower-48.
Wielechowski wanted to know why that was. He checked the "mom-and-pop" gas stations, and found that their profit margins were essentially unchanged. Gas stations make anywhere from 15 to 25 cents profit on a gallon pumped at their stations.
Then Wielechowski checked the refiners operating margins -- and he says that they had changed. A graph of refinery-margins shows that after 2008, the margins for Alaska refineries shot way up above the national average... And it remains there to this day.
That's why Wielechowski is urging passage of Senate Bill 28. He says the refineries have an oligopoly here in Alaska -- essentially very little competition. Indeed, there are only two main refiners in the state: Tesoro and Flint Hills.
He says that lack of competition is causing refiners to charge what the market will bear. State Representative Les Gara agrees with Wielechowski. Today he accused Alaska refiners of -- in effect -- looking at the cost of Seattle-refined gasoline, figuring out what it costs to ship the refined gas up here to our state... And then charging only slightly less than the Seattle price. He supports Wielechowski's measure.
Today's was a public hearing, but for some reason no refiners testified before the Senate Labor and Commerce Committee. Staffers in the office of the Chair and Co-Chair of the Committees weren't immediately sure why.
But State Senator Cathy Giessel (R) Anchorage thought the refiners were being ganged-up on unfairly. She said that Seattle is rich in hydropower -- and implied that might be the reason why Alaska refineries produced more costly gasoline than Seattle does. She said that Alaskan refiners are forced to use diesel fuel to power the refining process... And she believed that could be a key reason why refiners here can't rival the prices of the Lower-48. She also said that Alaska has greater distances -- and a smaller market.
But Weilechowski disagreed. He pointed again to his graph, which showed Alaskan refiners in-line with the margins of refiners in the Lower-48. Then, suddenly, the margins of Alaskan refiners jumped high and stayed high. He believes there's only one answer for that differential over the last 4 years -- price gouging.
Senate Bill 28 would empower the Alaska Attorney General to investigate refiners whenever unusual price differentials occur. And it would also empower the state to collect a fine of ten times the refiners profits whenever price-gouging is proven.
Tonight the measure sits before the Senate Labor and Commerce Committee.
It could move out of committee as early as next week.