Barry Paige, a retired pipeline worker from Wasilla, delayed buying gasoline in Canada as he drove down the Alaska Highway to catch the ferry. He figured he could buy it cheaper here.
On Dec. 29, Paige was using his cell phone to take a picture of gas prices posted on Second Avenue – $4.43 per gallon. “I was amazed. I took two photos in Haines and this was one of them,” he said. Gas in Wasilla was selling for $3 or less, Paige said.
Paige wasn’t the only photographer. Resident Amy Thorgerson posted a picture of the local price on Facebook. “I posted that because I saw so many other people posting on Facebook and saying, ‘Look how cheap it is.’ Well, I wanted to show that it is not cheap everywhere.”
Haines pump prices dipped about 50 cents per gallon after Jan. 1, but they were still far above the state average of $2.93 Monday and about 50 cents per gallon more expensive than Skagway, 15 miles north of town on the barge run from Seattle.
Falling oil prices worldwide have translated to big savings at the pump for Lower 48 residents, but not so much for Alaskans, and less yet for Haines residents. Unleaded prices this week included: Anchorage, $2.79; Fairbanks, $3.03; Delta Junction, $3.19; Sitka, $3.29; Tok, $3.39, and Skagway, $3.43.
AlaskaGasPrices.com estimates that the average price in Alaska has dropped 30 percent, from a high of $4.19 in the first week of July to this week’s low of $2.93. In Haines, prices have fallen only 19 percent.
That’s the difference from a high price of $4.83 on July 1 to this week’s $3.92, according to price data provided by Gregg Richmond, owner of the filling station on Second Avenue.
Gasoline in Southeast Alaska is barged in from Washington.
Fred Gray, facility manager for Delta Western, Haines’ lone fuel distributor, declined comment on prices, including on why the price of unleaded increased a dime per gallon for unleaded at one local station last month.
Part of the price in rural areas is inventory and turnover, according to Patrick DeHaan of GasBuddy.com, one of the nation’s largest aggregators of gasoline price data. “I expect these questions from any rural area… Storage tanks are holding more expensive gasoline.”
Smokey Norton is vice-president of marketing for Petro Marine, a regional fuel distributor that serves Skagway.
“The issue that makes Alaska different (is) the fuel that you get today is probably fuel that was bought six weeks or two months ago,” Norton said. “We are always behind. We lag the Lower 48 market because of the time. Every time we have a steep dive in prices, I get phone calls about how much gasoline costs in Tucson. It goes the other way, too. If the price in Seattle went up 50 cents today you wouldn’t see a change in our prices. We don’t adjust prices until the fuel comes into the inventory. Only when the prices rise elsewhere, we don’t get the phone calls about what a good job we are doing.”
However, another part of the issue may be a lack of competition among distributors. Petro Marine once competed with Delta Western in Haines. In Southeast Alaska, the market may be best described as duopoly with Petro Marine serving some communities, and Delta Western supplying others.
According to its website, Petro Marine distributes fuel in Craig, Juneau, Ketchikan, Petersburg, Sitka, Skagway and Wrangell. Delta Western sells in Haines, Juneau, Wrangell, Yakutat, and Sitka.
Caroline Schultz, an economist for the Alaska Department of Labor who specializes in Alaska cost-of-living data, said that “the real economic issue is that there is not a lot of competition in the wholesale distribution of gas (in Alaska). It is infrastructure intensive and it might be redundant to have two distributors in an area.”
Schultz said it’s likely that a percentage of the higher gasoline prices paid in Haines owes to a lack of competition, but estimating that amount would be difficult for an outsider.
In 2008, the last time crude oil prices dropped below $50 a barrel, Alaskans complained loudly that prices here did not fall proportionally to those in the Lower 48 and the Alaska Legislature initiated an inquiry into gas prices.
“They ultimately found that there was no evidence of anyone breaking any laws, but the gas distributors in Alaska do control the market and can get away with gouging us legally,” Schultz said.
Assistant Attorney General Ed Sniffen, leads the Commercial and Fair Business Section of the Alaska Attorney General’s office and has been involved in investigating Alaska gasoline prices since the 2008 inquiry. Sniffen said this week that the gasoline distribution network in the more rural areas of Alaska seems to be a problem of natural monopoly, in that the market simply doesn’t support competition.
“In this instance, sellers are free to sell their products at whatever prices they can. It isn’t illegal to have high prices. What the law frowns upon is collusion to artificially keep prices where they are. Are their prices deceptive or unfair? It is very difficult for the law to determine what is a fair price.”
Sniffen said there’s been discussion of legislation “to set a marker” to discourage price gouging, requiring companies to justify prices that were above a certain price based on Seattle wholesale price plus transportation.
Tim Cochran of Petro Marine in Skagway said the gas price difference between the two towns might result from Delta Western holding higher-priced inventory and Skagway’s forgiveness of sales tax in winter.
Cochran said Petro Marine wholesale prices in Skagway are based on a number of factors, including inventory costs and an average of prices across Southeast Alaska. Cochran said that Petro Marine wholesale prices are set by corporate headquarters.
According to Cochran, Skagway received a barge shipment of about a million gallons in mid-December and usually receives two barges a year. Skagway is a waypoint and much of the gasoline that is barged in continues on to Whitehorse, Y.T., where it is sold and further redistributed for points further out.
Because Delta Western’s barges dock at a facility owned by the Borough, some data is publicly available. Haines Borough chief fiscal officer Jila Stuart said the last shipment of gasoline to Haines came across the dock Dec. 4. Borough records also showed a fuel delivery on Dec. 21, but no record of gasoline delivery at that time.
Petro Marine’s Cochran said the wholesale price for points farther out the distribution chain would be higher than in Skagway to reflect the added cost of transport.
Fred Case, Cochran’s counterpart at Delta Western, refused comment for this article. Kirk Payne, president of Delta Western, said no gasoline barged to Haines is shipped to points farther north.
Petro’s Norton said he wouldn’t expect to see a lot of difference between prices in Haines and Skagway: “There is not a lot of difference between Delta Western and Petro Marine: They have barges, we have barges, they have terminals, we have terminals, they have people, we have people. Where we hope we make a difference is in being competitive with prices and providing good customer service.”
The owner of the Tesoro station in Tok refused to speak to the CVN. In Yakutat, another location served by Delta Western, prices were $5.66 at the pump this week.
An employee of Delta Western in Yakutat said the town had not been able to receive a barge with cheaper gasoline, partly because of weather conditions since November, but expected a barge in the next week or two, and lower prices.
GasBuddy.com’s DeHaan called Haines gas prices an “extreme example” and added that “companies do not want their monopolies disturbed. They don’t want angry politicians and angry motorists. It never hurts to call attorneys general and just kind of remind the distributor that you care enough to bring it up and that they should take care with the price they are setting.”