News Articles

Every time you gas up your vehicle and that hose locks into the tank, you, American person, are getting hosed. The energy scam we are presently experiencing is one smooth operation. This time the Arabs aren’t raising prices on barrels of oil. This time it’s not saber rattling from Iran that is driving up the price of gas. No, this time the problems are in Whiting, Ind., and Norco, La.

There are oil refineries in both those towns and they’ve had a few annoying problems. A little power outage here, a small fire there. And whenever the speculators hear of any problem in an American refinery, they bid up the price of oil. The oil companies see that and immediately tell your gas station guy to charge more.

There has not been a new oil refinery built in the United States since 1976. Conservatives say the environmental people are blocking construction. There is some truth to that, but the biggest problem in building more refineries is money. Big oil doesn’t want to spend billions on a new facility because they are making record profits now and alternative energies may be coming. The oil barons love the slowdowns in Whiting and Norco, especially when they occur at the start of the summer driving season. Let the profit party begin.

The free marketers hate me for telling you all this. They say it’s a “supply and demand” issue. Sure. If you stifle the amount of gasoline refined when everybody wants to drive, yeah, that price is gonna go up. But is that a “free market”?

You, yourself, cannot get into the oil “bidness.” It takes all kinds of government approvals every step of the way to market gas and oil. Believe me, “Lenny’s One Stop Energy Emporium” is not going to happen. Subway is not going to be franchising oil refineries any time soon.

It is beyond frightening that both Democratic and Republican administrations have not insisted more oil refineries be built. We as a country are totally dependent on gas and oil, and the economy will collapse if America doesn’t have enough of these commodities. But the government has good reason not to impede oil prices: taxes. The more you pay at the pump, the more money rolls into D.C.

But, again, no refineries have been built in 31 years, while demand has increased about 31 percent, one percent a year.

Appeals for Americans to conserve energy are swell, but they won’t work. We are an immediate-gratification society. We want what we want and, if it’s a Hummer, blank you if you don’t like it.

The only way a catastrophe can be headed off is for Congress to get serious with the oil companies and demand they upgrade and expand refining capacity, and play fair on prices. If Congress does not do that - major pain is coming for America.

Have you noticed in the past few weeks the price of oil has been in a near free fall? Even the price of gasoline has dropped significantly, except in the villages.

But can someone explain why the price of heating oil has not come down? In fact it has risen a bit.

Heating oil is a by-product of the refining process. There is minimal cost to produce it, yet heating oil is costing as much as premium gasoline, and there is no road tax on heating oil. It is past time for the Alaska Legislature and the House and Senate in Washington, D.C. to investigate this fleecing of the people and the robbery of the villages.

I was astonished the other day at what I saw when my friend’s mother was filling her gas tank when I was with her, over at the Safeway Gas pump on College Road. The man across from us decided he was going to brave filling up his whole tank

As his 28 gallons poured through the spigot, the price jumped up and up … When it clicked, and the pump stopped, the price read, “$68.36+A+1L”. I pondered, only for a moment, what this could mean, I thought for a second it had something to do with the credit card he used.

But no, this was no charge Visa or MasterCard could cover, two trapdoors opened on either side of the pump, one about shoulder height, one about waist high, and two dull axes swung at the man’s left shoulder, and right hip, collecting the charge of “An Arm and a Leg.” Plus $68.36.

“It was useless for me to fill up my tank after I realized that the gas pump had also withdrawn all of my funds. Not to mention it hurt like hell,” he stated in the ER.

What’s next, attached nurseries so that parents must leave infants to pay for their gas? Or perhaps BP will design a scanner that will collect deeds to houses and properties in order to top off that tank.

I’m not in direct need of paying for my own gas, but I am old enough to realize that if the people I live with can’t afford gas, I can’t go anywhere, if we can’t pay for our oil, I go to sleep cold. Is this really what we are going to have to resort to?

Will gas companies ever find an end to how much is too much for what they charge? Who knows, pretty soon all of America will be homeless and living out of their car with a full tank of gas, waving with their one arm, and controlling the pedals with one leg, childless, and parked with the ignition off to save gas.

Oil prices still flag; at pump, that helps

NEW YORK -- Alaska oil prices plunged below $50 a barrel Thursday for the first time since June 2005.

The fall of Alaska prices, and those of other oil produced around the world, extended a sharp decline that has been led by dampened heating oil demand but could save consumers money on a more widely used fuel: gasoline.

Crude oil has tumbled by 15 percent so far this year in a huge sell-off that was sparked by investment funds last year and then stoked by a historically warm U.S. winter that has left supplies of heating fuel barely touched.

Global Insight energy analyst Kevin Lindemer said that typically, for every dollar the price of crude goes down, you see a corresponding 2-2.5 cent drop in prices at the gas pump.

In Alaska, state revenue rises and falls with oil prices because the North Slope oil fields lie on state land. Every $1-a-barrel change in the oil price is worth about $90 million over a year's time.

Alaska lawmakers wrote this year's budget when the forecast price of oil was $54 a barrel. Since the budget year started last summer, the price has averaged about $62.

But the price has been falling since topping $70 in August. Thursday's close on West Coast open markets was $49.13 a barrel, down $2.14 for the day and down $4.43 cents this week.

Factors that could cause oil prices to rise again are the possibility of escalating tension in the Middle East, growing global energy demand, violence in Nigeria and production cuts by OPEC.

"The impact of the weather should not be overstated. Heating demand is a comparatively small part of global consumption," said Antoine Halff, an energy analyst at Fimat. "There's potential for a rebound."

It seems to me that if there is anywhere in the United States that should not have energy problems it is Alaska.

I heard the contestants for the last election debating the solutions to many of the state’s problems and it occurred to me that all of them would be solved if our petroleum prices were significantly lower. Could someone please explain to me why as a prerequisite for pumping our oil from our state the oil companies would need to market petroleum in this state at a price that would solve our economic problems?

If the oil is the state’s resource, why shouldn’t the (we the people of) the state gain the same profits from the oil as the people who exploit the resource? With Alaska’s small population the oil companies wouldn’t even have to suffer a significant cut in their own criminally high profits!

OP SPOT: Koch Industries, the company that owns the Flint Hills Refinery in North Pole, has jumped to the top of the list of the largest private companies in the nation, according to Forbes magazine.

The company has $90 billion in revenues. It was the $21 billion acquisition a year ago of Georgia-Pacific that put Koch ahead of Cargill, the previous No. 1.

“Having inherited Koch Industries from their father Fred, Charles and his brother David control a variety of operations from energy to ranching to securities and finance. Worth $4 billion, the brothers rank at 138 on the Forbes list of the World’s Richest People,” the magazine reported in 2005. Charles is a founder of the Cato Institute.

Arctic Slope Regional Corp., with revenues of $1.6 billion and 6,600 employees, is the only company headquartered in Alaska on the list and is ranked 239th.

Gas prices

Nice try at explaining the gas prices in Fairbanks News-Miner. Next time you do a story on gas prices instead of asking kids at the pump who are pumping gas for mom why not ask Flint Hills why in a matter of 10 minutes I found 76 gas stations through out the states using gasbuddy.com that sell gas at the pumps for less than they sell it to their suppliers.

Sure people are happy the price here is down to $2.61. But the fact is the national average is $2.21 and in a lot of places it’s cheaper than that.

And that’s the price without spending $50 or a $100 to get a dime discount. So does $2.61 still sound like a good deal?

Fuel Prices – Myths Revealed

I must say that I was a little disappointed at the recent story on gas prices. All the facts were true but I thank that we all need to take a closer look. First of all, Flint Hills does pay less than west coast prices for their oil. They then turn around and sell the refined product for 20-50% more than the west coast refiners. The formula for the purchase of royalty oil from the state is actually very simple; North Slope price - $1.55 - Tariff Allowance + Quality Bank Adjustment - Line Loss = $5-6 discount per barrel. The quality bank adjustment that Jeff Cook commonly refers to must be the premium at approximately $.30 per barrel or 7/10 of 1 cent per gallon. The refinery, however, is not the only one taking advantage of us.

The recent News-Miner article stated that the retail markup of gas was 30-40 cents per gallon. What was left out is that this up to 200-300% more than most markets nationwide. In many competitive markets the margins are less than 10 cents per gallon with Anchorage at about 15 cents per gallon. What we have happening in Fairbanks is a total lack of competition. The retailers have been consolidated down to a few owners and the box stores have just made the situation worse. When the box stores first entered the fuel business there was some real competition resulting in lower prices. Now we are left with a situation where the box stores are charging what we used to pay and Tesoro and Holiday are charging a premium for convenience because no one seems to take notice.

The result is quite obvious, a tank full of gas and an empty pocketbook. What can we do? Tell Jeff Cook and Flint Hills that we have had enough. Demand more as consumers and drive around the corner to save 10 cents a gallon. If we all went down the road to save a dime, pretty soon we would start to see some competition and we would all be paying less.

For more information, weekly wholesale prices and to see what you can do, go to www.fairbanksgas.com.

Gas prices based on complex equation

By Mary Beth Smetzer
Published October 22, 2006
Posted in Fairbanks Daily News-Miner

Local gasoline prices are a hot topic of conversation. But there’s such a range of speculation and conspiracy theories circulating that consumers don’t know whether to feel gouged or grateful about lower gas pump prices. Many consumers question why gas pump prices are lower in Anchorage and the Lower 48 than they are in Fairbanks. According to the Automobile Club of America, the national average price of a gallon of self-service regular has fallen 50 cents in the past year. Just a month ago, according to the AAA Web site, the average price per gallon in the Fairbanks area hovered around $2.911. On Saturday, it averaged $2.736, a drop of about 18 cents per gallon from a month ago, the auto club reported. Locally, prices ranged from $2.55 per gallon to a high of $2.80 per gallon, according to the Alaskagasprices.com Web site. No wonder motorists are confused as they puzzle over where to buy their next tank of gasoline.

Locally, consumers dissatisfied with gasoline prices often point their fingers at Flint Hills Refinery in North Pole, which supplies the bulk of gasoline to local vendors. Flint Hills is the only one of the two local refineries that produces gasoline.The other refinery, Petro Star, manufactures heating oil and jet fuel. Flint Hills buys Alaska royalty oil, and by law, the refinery must sell its gasoline for the same or a lower rack price in Fairbanks as it does in Anchorage. The rack price, explained Jeff Cook, a Flint Hills spokesperson, is the base price paid by gasoline distributors who fill up tanker trucks at the Flint Hills terminal. “We are not in the retail business,” Cook emphasized in a recent interview. However, Cook acknowledged that not every customer who fills a tanker truck up with gasoline at Flint Hills pays the same price per gallon. “It depends on the quantity they buy and the payment terms,” Cook said, adding that “the difference (in price) is not significant.” And if there is a change in the rack price, Cook said, everybody gets the same price change. “If it goes down 7 cents one day, everybody’s price goes down 7 cents,” Cook said.

Flint Hills has lowered its rack price 11 times since Aug. 11, from $2.535 to the current rate of $2.055 per gallon, a drop of 48 cents. Decreases over the nine-week period were in increments of between 2 and 7 cents. The most recent drop was 7 cents, lowered on Oct. 14. How Flint Hills or any refinery figures out its per gallon gasoline price is a complex equation. Flint Hills buys Alaska royalty oil, which comes at a higher price and includes a premium of approximately 30 cents per barrel. What Flint Hills ultimately pays for the crude oil it removes from the trans-Alaska pipeline and refines at its North Pole terminal is based on West Coast prices. “We don’t get a break in crude prices,” said Allen Lasater, a Flint Hills venture leader. “Our prices are tied to West Coast prices.”

According to Cook, price calculations are made through a quality bank that weighs in high- and low-grade crude for the ultimate West Coast price. That price is then taken into consideration by the Flint Hills marketing office in Anchorage, which sets the refinery’s gasoline rack price. The difference in prices between Flint Hills rack price and local gasoline station pump prices involves the retailer’s addition of 26.4 cents in state and federal taxes and the gasoline retailer’s additions for overhead such as delivery expense and profit margins.

Alaska’s gasoline tax is the lowest in the nation at 8 cents per gallon. The federal tax is 18.4 cents. The 25 cent per gallon range difference in current local retail prices ($2.55-$2.80) depends primarily on the retailer. Pleasant Valley Store, a locally owned convenience store at 23 Mile Chena Hot Springs Road, consistently offers the lowest price per gallon for regular unleaded gasoline. “It is part of being a community out here,” said Dennis Alexander, referring to Two Rivers. “We are trying to be a service to the community and not hold anybody over the coals.” According to Alexander, he and his wife, Becky, sell between 4,000 to 4,500 gallons of gasoline from two old-fashioned pumps each week. “We seldom make 10 cents per gallon, sometimes zero cents,” Alexander said.

Saturday, the price for a gallon of unleaded regular gasoline was $2.55 at Valley Center, the same price offered by Safeway and Fred Meyer gas stations. The difference was that the retail store customers had to have earned $50 or $100 credit, respectively, on their rewards cards for a one time fillup at the $2.55 price. It’s no secret there’s a price war going on between retailers. Safeway, Fred Meyer and Sam’s Club keep abreast of price changes around town daily. “We have competitor checks three times a day that we have to input into our computers,” said Dave Atlee, manager of Fred Meyer West. The Fairbanks Sam’s Club is the only one of three Sam’s Club stores in Alaska that sells gasoline, and its competitive prices only require a club membership. “We want to be a one-stop shopping experience for our members,” said Olan James, a Sam’s Club spokesperson. “We have small business owners who do their shopping and gas up for the day in the early morning during special gold key hours.”

The box store gasoline price competition has affected independent and brand stations around town. Gus Johnson, owner of Alaska Petroleum, a gasoline wholesaler who operates two Gas Line stations, said there isn’t much choice but to try and keep up. “We change when Fred Meyer changes to pretty close to their price. We try to follow the box stores. That’s the competition.” Another longtime small businessman, Les Fickes who operates Riverview Quick Stop on Badger Road, said he is struggling to compete. “I used to make at least 20 cents a gallon in the ’70s with manual pumps and no overhead to speak of,” Fickes said. But by the 1990s, large insurance premiums and EPA requirements changed all that and Fickes invested $250,000 to install pumps, computers and underground tanks.

That was before the box stores installed their own gas stations. Now he’s finding it difficult to keep up with the maintenance costs due to pumps and computers breaking down, in addition to the large insurance premiums. “I couldn’t make a living just selling fuel, but I have to have it if I’m selling potato chips, etc.,” he said. Fickes says he has to mark up his fuel costs 23 cents to cover overhead and another 10 cents for a liveable profit margin of $45,000 a year. “How much does a government worker make a year with no investment?” he asked. “Considering all perks, including retirement, I would say at least twice this amount.”

Over the oil barrel

I’ve seen it twice mentioned, that the Flint Hills Refinery purchases most of its oil from the state of Alaska at a “premium to the fair market value for the crude oil.” It’s a very nice way of saying Flint Hills pays more for oil than it normally would, because it has to buy it from the state at that higher price.

I’m not a fan of Flint Hills. I say “shame on them for entering such a contract.” But they don’t really care because they still get their money in the end. Who else are we going to buy from? The bigger thorn in the paw, comes from our lovely state government for putting the screws to us like this. They know that higher cost they are forcing Flint Hills to pay, will just be passed on to us, the residents. They have essentially taxed us, by adding on the higher price for the fuel we must use. They found the way to get that dividend check back out of our pockets, without most of us even noticing.

I’ve been kind of shocked that local governments haven’t been screaming at the state for all the higher budget problems it’s faced just to keep schools and other buildings heated and lit. Another tax just passed on to you and me.

Will someone please tell the state legislators to stop bending us over the barrel? Let them know we see what they are doing and it’s not funny.

A perspective on prices at the pump

In recent weeks there has been a great deal of discussion about gasoline prices in Alaska. Part of that dialogue included incorrect information leading to misconceptions about why Alaska retail prices have not dropped significantly as they have in elsewhere in the country.

As a leading gasoline refiner in the state, we at Flint Hills Resources Alaska wanted to offer some perspective on this issue.

First, despite what some have suggested, wholesale gasoline prices in Fairbanks are comparable to other areas of the state, including Anchorage. It helps to understand there are several steps in getting fuel from the refiner to the retail pump. Flint Hills is not in the retail gasoline business. Some of our retail customers purchase directly from us, some purchase through a delivery firm and yet others purchase their branded gasoline through a wholesale bulk plant. Each of those suppliers in the gasoline supply chain make independent pricing decisions that are beyond the input and control of Flint Hills as the refiner of the gasoline. Bottom-line, there are a number of links beyond refiners in the gasoline supply chain who impact and ultimately determine the price Alaskans ultimately pay at the pump.

Second, our posted rack price, or the price we charge for the gasoline we produce, has dropped consistently in recent months. It’s important to note that our contract with the state of Alaska to purchase royalty crude oil stipulates that the posted rack price for gasoline at our Fairbanks terminal be equal to or less than the posted price at the Anchorage terminal. We have complied with that commitment.

For example, our posted price at both Fairbanks and Alaska for 87 octane gasoline on Aug. 8 was $2.535, excluding the combined federal and state gasoline tax of $.264. On Oct. 5, the posted rack price was $2.165 before the taxes. And there have been further decreases in the posted rack price since Oct. 5th.

Third, comparisons between the price of gasoline in Fairbanks and the rest of the United States are not relevant. Because Alaska North Slope crude prices and quality bank adjustments are based on West Coast prices, retail price comparisons to the West Coast and Anchorage markets are more accurate comparisons than U.S. average prices.

A final misconception is that our company receives a cost-break on the price we pay for crude. That simply isn’t so. When we acquired the North Pole refinery in 2004, we had a 10-year contract with the state of Alaska to purchase a large portion of the state’s royalty share of North Slope crude oil production. To approve the contract, the state required us to pay a premium to the fair market value for the crude oil.

Ultimately, the market sets the final retail gasoline price with a number of independent businesses in the gasoline supply chain that are part of the final price to consumers. Flint Hills Resources Alaska remains committed to supplying quality products to our customers and we are always happy to provide this information relative to our role in providing gasoline to the Fairbanks area market. Feel free to contact us by phone or e-mail if you have additional questions.

Jeff Cook is director of external affairs for Flint Hills Resources Alaska, LLC. Reach him at 488-5104 or Jeff.cook@fhr.com.

Fuel prices

It is because of the refinery at North Pole, owned by Holiday. They are charging far more than fuel is selling at retail down south, even though they are buying your royalty oil at a competitive price.

As of this writing, I’m paying $2.639 a gallon for unleaded regular. It cost me .07 cents a gallon for credit cards. I was forced by the government to install a new computer system that operates the pumps. The system cost over $30,000.

The reason for the new system was it prints less information on the sales slip. More government regulations!

Simple math, pay $2.639 per gallon. Charge $2.839 per gallon, leaves 20 cents a gallon gross profit. Credit card fees of .07 cents per gallon leaves 13 cents a gallon profit. Add lighted canopy, pump maintenance, mandatory inspections, etc. My profit margin is approximately 2 percent.

Gas prices don't fall so quickly in Alaska

When Steven Tuck topped off his Ford F-250's twin gas tanks at the Northway Mall's Carrs gas station around lunchtime Wednesday, he figured the $70 and change it cost was a pretty good deal. He drives a lot for his job as a handyman, and lately he's been keeping a close eye on gas prices around town. That way, he knows the best places to pull in and fill up when he starts running low.

"There are a bunch of different prices around town," he said. "Fred Meyer's and Carrs are usually the cheapest these days."

Tuck and other Anchorage-area price watchers have seen the price of a gallon of regular unleaded fall 9 cents over the past month to an average $2.76 a gallon, according to figures compiled by Gasbuddy.com, a Minneapolis-based outfit that collects gas price information from consumers nationwide.

Nationally, gas prices have fallen much faster than in Anchorage, although prices in the West have generally lagged the decline, said Jason Toews, co-founder of GasBuddy.

The lower prices in Anchorage have been a welcome relief to area drivers, who were paying nearly $3 a gallon when prices peaked in late May.

And prices at the pumps are likely to continue to drop in the coming weeks as recent declines in crude oil prices work their way through the market, said Lynn Westfall, Tesoro Corp.'s chief economist.

Tesoro and Flint Hills Resources are Alaska's two major gasoline refiners. A Flint Hills spokesman did not return phone calls seeking comment.

Crude oil prices -- which account for a big portion of the price of gasoline -- have fallen hard and fast over the past month, while gas prices have come down much less.

For Tesoro's part, that's due in large part to a lag between the time it buys the crude oil and when it refines it into gasoline, Westfall said.

"The gasoline you're buying today was based on crude oil we bought 45 or 60 days ago," he said.

Over the past month, Tesoro has been gradually lowering the price at which it sells gasoline to area filling stations, Westfall said, without providing specifics.

In the coming weeks, those prices likely will continue to come down, reflecting the sharp declines in crude oil prices, he said.

But lower wholesale prices won't necessarily equate to lower prices at the pump right away, said Toews of GasBuddy, which runs more than 170 gas-price-tracking Web sites focusing on cities across the United States and parts of Canada.

Gas station owners in smaller markets such as Anchorage where there is little competition tend to raise their prices quickly when wholesale prices go up but are slow to lower them when wholesalers cut their prices, Toews said.

"They go up quickly, but they don't come down quite as quickly," he said. "They want to maximize their profits, so only if Joe's gas station lowers its price two pennies a gallon does Bob's across the street lower its price two pennies."

Spotters for GasBuddy's Anchorage site, at www.anchoragegasprices.com, reported a wide range of prices at stations around town Wednesday -- from as little as $2.70 a gallon at the Dimond Boulevard Costco to as much as $2.87 at the Tesoro station on Jewel Lake Road.

Though Anchorage gas prices have come down 9 cents in recent weeks, the average price nationally for a gallon of unleaded plunged 44 cents in the past month to $2.46, according to GasBuddy's figures. In some parts of Missouri, gas sells for about $2 a gallon.

Tesoro's Westfall said that slow price drops are typical in smaller markets where there aren't very many gas stations.

"Niche markets like Hawaii, Alaska and even Salt Lake City and Denver, tend not to react as quickly to price changes as bigger markets with a lot of players and larger volumes.

"There just aren't people who will quickly take advantage of price differences like in Houston, for example, where some people make their living by exploiting small changes in price," he said.

News Articles

Oil prices still flag; at pump, that helps

Gas prices

Fuel Prices – Myths Revealed

Gas prices based on complex equation

Over the oil barrel

A perspective on prices at the pump

Fuel prices

Gas prices don't fall so quickly in Alaska

Our Mission

Donate to support our cause

Send mail to webmaster@fairbanksgas.com with questions or comments about this web site.
Copyright © 2006 Fairbanks Gas Consumers

News Articles

Oil prices still flag; at pump, that helps

Gas prices

Fuel Prices – Myths Revealed

Gas prices based on complex equation

Over the oil barrel

A perspective on prices at the pump

Fuel prices

Gas prices don't fall so quickly in Alaska

Our Mission

Donate to support our cause

Send mail to webmaster@fairbanksgas.com with questions or comments about this web site. Copyright © 2006 Fairbanks Gas Consumers

Send mail to webmaster@fairbanksgas.com with questions or comments about this web site.
Copyright © 2006 Fairbanks Gas Consumers