Alaska gas prices among highest in U.S., despite producing most of it in-state

Across the country, Americans have seen record high gas prices this year, but the spikes haven’t been distributed evenly. Many southern states are currently paying around $3 a gallon at the pump, but a few western states, including Alaska, are averaging nearly $5 a gallon. 

Anchorage Daily News reporter Alex DeMarban recently wrote about why Alaska’s gas prices are so much higher than other states. He says prices here are high even though the state supplies so much crude oil used to make gasoline.

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The following transcript has been lightly edited for clarity.

Alex DeMarban: We are traditionally one of the most expensive states in the US for gasoline. And part of that is just because of our remoteness and our small volumes, small demand for gas. So the things that also make other prices high here in Alaska for milk and everything else contribute to that. But more recently, we’ve had multiple refineries in Washington and California that were having planned or unplanned shutdowns. And the oil refineries that make the gas therefore have had a tight supply of gas. And so that has meant that prices on the West Coast, not just for Alaska, but for several states, including California, Washington, Oregon, Nevada, have really been quite a bit higher than the rest of the US. And in Alaska’s case, we’re about $1 higher than the average right now.

Michael Fanelli: Does the fact that we produce a substantial amount of crude oil in-state help at all with those prices?

AD: I’m not sure of the mysteries of what goes on behind the scenes. But because we start out, you know, even though it’s our own oil, it starts out at the same price as the world market. And much of that is refined right here. We’re essentially going off the same system at that point as the rest of the world. Most of the gas is made at the Marathon Petroleum refinery in Nikiski. I mean, nearly all of it that’s consumed in Alaska on the road system is made there. One refiner also limits competition – and that’s another key factor that we face compared to other states, where there would be multiple refineries in the region.

MF: So the majority of Alaskan gas at the pump comes from the one refinery in Alaska, we are refining most of our own gas?

AD: Yeah, most of what we’re driving on, especially on the road belt, maybe all of it or almost all of it, as I understand it, is coming from our Alaskan oil. And it’s being refined down in Nikiski, some of the oil from Cook Inlet, and then I presume that some of the North Slope oil at times can be used to supplement. And then I also understand that oil is also shipped up at times for use for gasoline, but it’s primarily Alaskan oil.

MF: So even though we refine most of our own gas here in Alaska, our pricing is still tied to that in other states?

AD: Yeah, well, we start with the price of oil, which starts out at the same as their price. And then there’s no price-gouging law. There’s one refinery, one refiner, and the gas price is still based on the nearest market, which is Seattle. Or it’s connected to that, in a sense, and we get the same gas price roughly, as they do in Seattle. And Marathon has the ability to kind of set refining prices, at the very start of this chain.

MF: Do you expect Biden’s release of more oil from the strategic reserve to bring down prices at all?

AD: I think it’ll help stabilize prices. I think it did lead to a little bit of a drop, at least in the futures market. And so I expect that it will help stabilize prices. I would think that we’re going to be at this price, I guess, if that’s my prediction that we’ll be at this price, within a small amount, either way, for a little bit of time. Unless there’s some kind of, you know, other crazy event that happens. Who knows what’s next? But yeah, I think things like that do help. But I think the help is somewhat limited.