What others say: Oil price drop not without benefits

  • Tuesday, January 6, 2015 4:30pm
  • Opinion

As unlikely as it seems, there are a few benefits to Alaska residents that come with lower oil prices. The slump, in which prices have dropped to levels between $60 and $80 per barrel in recent months, has left the state budget in a world of hurt, and there’s no question residents will feel a host of negative effects of that lost production tax revenue. But there’s a silver lining for residents that takes a bit of the sting out of the market downturn.

The first and most obvious boon of low oil prices comes for Alaska drivers at the gas pump. The drop in oil prices from more than $100 per barrel to about $60 per barrel has resulted in gas prices dipping from the $4-per-gallon range in summer down to just more than $3 per gallon at present in Fairbanks. Heating fuel prices have experienced a similar drop, with fuel now at about $3.05 per gallon and giving residents some relief when paying home heating bills.

Unfortunately, Interior villages haven’t seen much, if any, benefit of the drop in gas prices yet, as they tend to purchase gas and heating fuel in bulk orders delivered by barge, at a price set at the time of initial purchase. That means residents in outlying areas — who already pay some of the highest fuel costs on the continent — are stuck paying high prices for petroleum products until they deplete existing supply and make a new order to fill village tanks.

There are also secondary benefits likely to matriculate to state residents, as prices on many commodities are governed by the cost of transportation.

Everything shipped into the state from Outside, whether furniture, building material or groceries, passes the cost of fuel to transport it to the state along to the consumer. Retail prices do tend to lag, as retailers are less sensitive to downward cost trends than upward ones, but the longer transportation costs stay low, the more likely it is competition between suppliers will force prices downward.

Though the cost of airfare has yet to show impacts from the reduced cost of fuel, that may well take place as oil prices remain low. Fuel costs represent about 30 percent of total operating costs for airlines, and while ticket prices aren’t yet dropping — a fact that led to pointed questions from Congress to airlines in mid-December — strong competition between airlines for coveted routes are likely to lead to lower ticket prices before long. We’ve seen that in Alaska recently with the summer fare wars between Delta and Alaska Airlines — with luck, perhaps 2015 will bring round two.

The continued decline of oil prices will hit the state hard, leading to a host of impacts to state services like education, health and social services and public safety. But in addition to the aforementioned benefits to consumers, the downturn in state revenue has one major plus for Alaska: reining in the budget, which had been given lip service by the Legislature as spending swelled in recent years, is now not only a priority but a mandate. It’s time Alaska returned to living within its means.

— Fairbanks Daily News-Miner,

Jan. 3

More in Opinion

This image available under the Creative Commons license shows the outline of the state of Alaska filled with the pattern of the state flag.
Opinion: Old models of development are not sustainable for Alaska

Sustainability means investing in keeping Alaska as healthy as possible.

Gov. Mike Dunleavy unveils proposals to offer public school teachers annual retention bonuses and enact policies restricting discussion of sex and gender in education during a news conference in Anchorage. (Screenshot)
Opinion: As a father and a grandfather, I believe the governor’s proposed laws are anti-family

Now, the discrimination sword is pointing to our gay and transgender friends and families.

Kenai Peninsula Education Association President Nathan Erfurth works in his office on Thursday, Oct. 28, 2021, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: Now is the time to invest in Kenai Peninsula students

Parents, educators and community members addressed the potential budget cuts with a clear message.

Gov. Mike Dunleavy holds a press conference at the Capitol on Tuesday, April 9, 2019. (Juneau Empire file photo)
Opinion: An accurate portrayal of parental rights isn’t controversial

Affirming and defining parental rights is a matter of respect for the relationship between parent and child

t
Opinion: When the state values bigotry over the lives of queer kids

It has been a long, difficult week for queer and trans Alaskans like me.

Dr. Sarah Spencer. (Photo by Maureen Todd and courtesy of Dr. Sarah Spencer)
Voices of the Peninsula: Let’s bring opioid addiction treatment to the Alaskans who need it most

This incredibly effective and safe medication has the potential to dramatically increase access to treatment

Unsplash / Louis Velazquez
Opinion: Fish, family and freedom… from Big Oil

“Ultimate investment in the status quo” is not what I voted for.

An orphaned moose calf reared by the author is seen in 1970. (Stephen F. Stringham/courtesy photo)
Voices of the Peninsula: Maximizing moose productivity on the Kenai Peninsula

Maximum isn’t necessarily optimum, as cattle ranchers learned long ago.

(Ben Hohenstatt / Juneau Empire File)
Opinion: The time has come to stop Eastman’s willful and wanton damage

God in the Bible makes it clear that we are to care for the vulnerable among us.

Caribou graze on the greening tundra of the Arctic National Wildlife Refuge in northeast Alaska in June, 2001. (Michael Penn / Juneau Empire File)
Opinion: AIDEA’s $20 million-and-growing investment looks like a bad bet

Not producing in ANWR could probably generate a lot of money for Alaska.

A fisher holds a reel on the Kenai River near Soldotna on June 30, 2021. (Photo by Ashlyn O’Hara/Peninsula Clarion)
Voices of the Peninsula: King salmon closures long overdue

Returns have progressively gone downhill since the early run was closed in June 2012

(Clarise Larson / Juneau Empire File)
Opinion: Fixing legislative salaries and per diem

The state Senate was right to unanimously reject giving a 20% pay… Continue reading