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

A silver salmon is weighed at Three Bears in Kenai, Alaska. Evelyn McCoy, customer service PIC at Three Bears, looks on. (Photo by Jeff Helminiak/Peninsula Clarion)
Opinion: Will coho salmon be the next to disappear in the Kenai River?

Did we not learn anything from the disappearance of the kings from the Kenai River?

Jonathan Flora is a lifelong commercial fisherman and dockworker from Homer, Alaska.
Point of View: Not fishing for favors — Alaskans need basic health care access

We ask our elected officials to oppose this bill that puts our health and livelihoods in danger.

Alex Koplin. (courtesy photo)
Opinion: Public schools do much more than just teach the three Rs

Isn’t it worth spending the money to provide a quality education for each student that enters our schools?

Gov. Mike Dunleavy speaks to reporters at the Alaska State Capitol on Thursday, April 17, 2025. (Jasz Garrett / Juneau Empire file photo)
Letter to the Editor: Law enforcement officers helped ensure smooth, secure energy conference

Their visible commitment to public safety allowed attendees to focus fully on collaboration, learning, and the important conversations shaping our path forward.

Laurie Craig / Juneau Empire file photo
The present-day KTOO public broadcasting building, built in 1959 for the U.S. Army’s Alaska Communications System Signal Corps, is located on filled tidelands near Juneau’s subport. Today vehicles on Egan Drive pass by the concrete structure with satellite dishes on the roof that receive signals from NPR, PBS and other sources.
My Turn: Stand for the community radio, not culture war optics

Alaskans are different and we pride ourselves on that. If my vehicle… Continue reading

U.S. Sen. Dan Sullivan (R-Alaska) delivers his annual speech to the Alaska Legislature on Thursday, March 20, 2025. (Jasz Garrett / Juneau Empire file photo)
Opinion: Sullivan, Trump and the rule of lawlessness

In September 2023, U.S. Sen. Dan Sullivan established his own Alaska Federal… Continue reading

UAA Provost Denise Runge photographed outside the Administration and Humanities Building at the University of Alaskas Anchorage. (courtesy photo)
Opinion: UAA’s College of Health — Empowering Alaska’s future, one nurse at a time

At the University of Alaska Anchorage, we understand the health of our… Continue reading

U.S. Rep. Nick Begich III, R-Alaska, address a joint session of the Alaska Legislature on Thursday, Feb. 20, 2025. (Mark Sabbatini / Juneau Empire file photo)
Opinion: A noncongressman for Alaska?

It’s right to ask whether Nick Begich is a noncongressman for Alaska.… Continue reading

Boats return to the Homer Harbor at the end of the fishing period for the 30th annual Winter King Salmon Tournament on Saturday, March 23, 2024 in Homer, Alaska. (Delcenia Cosman/Homer News)
Opinion: Funding sustainable fisheries

Spring is always a busy season for Alaska’s fishermen and fishing communities.… Continue reading

Gov. Mike Dunleavy holds a press conference on Monday, May 19, 2025, to discuss his decision to veto an education bill. (Jasz Garrett / Juneau Empire file photo)
Opinion: On fiscal policy, Dunleavy is a governor in name only

His fiscal credibility is so close to zero that lawmakers have no reason to take him seriously.

Sen. Jesse Bjorkman, R-Nikiski, speaks in support overriding Gov. Mike Dunleavy’s veto of House Bill 69 at the Alaska Capitol in Juneau, Alaska, on Tuesday, April 22, 2025. (Mark Sabbatini/Juneau Empire)
Capitol Corner: Finishing a session that will make a lasting impact

Sen. Jesse Bjorkman reports back from Juneau.