As of Monday, a gallon of gas costs $2.99 at the Petro Express on the Sterling Highway in Homer — down around 20 cents from the summer’s high.
But in that same time period, the national average has dropped more than 65 cents to $2.30 per gallon.
Homer is not the only Alaska town seeing a slow drop in gas prices.
The state’s largest market, Anchorage, has seen prices drop just 30 cents from its May high of more than $2.95 a gallon.
The slow decline in prices is causing consumers in several smaller markets — including some in the Lower 48 — to ask the same question: Why aren’t gas prices dropping quickly here, too?
The answer, said Tesoro’s chief economist Lynn Westfall, is competition.
The farther away you live from a large market, like Los Angeles and Houston, the slower prices react, Westfall said.
“We’re getting the same questions from people in Idaho, Salt Lake City and Hawaii,” he said.
What irks many Alaska consumers, however, is that prices shot up a whole lot quicker than they are moving down.
When prices began to rise nationally in March, the Alaska prices caught up in about two weeks. Now that gas prices are dropping, it’s taking closer to two months for Alaska markets to get in line.
Add that most of Alaska gas is refined in the state and comes from North Slope crude, and consumers and gas station managers like Robin Jaime at the Anchor Point Tesoro are left shaking their heads.
“I lower mine as soon as we can,” Jaime said. “It’s nuts. I don’t have any answers.”
Denise Harris of the Alaska Automobile Association said market forces drive Alaska gas prices just like they do in the Lower 48.
“I wouldn’t blame the refinery,” she said. In a sense, Alaska’s prices are dragged along with that of the West Coast states because they are willing to pay more for Alaska’s crude.
“It all comes from the same hole,” Harris said.
Alaska crude is shipped all over the world and fills the pumps of most of the West Coast, she said. Therefore, refineries in Alaska have to pay close to the same price as refineries in the Lower 48. That price was bumped up from the British Petroleum shutdown, and uncertainty about where prices are headed next, she said.
Consumers in the Midwest or on the East Coast, however, get most of their gas from the Gulf Coast. Fears of another brutal hurricane season that hasn’t developed there caused refineries to increase production, she said. This surplus helped drop prices quickly in large markets and drive down the overall U.S. average price.
According to gasbuddy.com — a Web site that tracks gas prices in the United States and Canada — the five cheapest states to buy gas in today are Missouri, Iowa, South Carolina, Kentucky and Georgia at an average price of $2.06 per gallon.
The top-five most expensive states are Hawaii, Alaska, Nevada, Washington and Oregon at $2.84 per gallon.
Competition — or lack of it — also can be blamed, in part, for local differences in price, said Westfall.
That’s why relatively larger markets, like Anchorage, have lower prices than Kenai. And Kenai has lower prices than Homer. The more gas stations an area has, generally, the lower the gas prices, he said.
Differing sales taxes also play a role in determining the final cost at the pump.
For instance, gas was $2.94 in Anchor Point on Monday and $2.99 in Homer. The Anchor Point price contains a two percent Kenai Peninsula Borough sales tax, while Homer’s gas is taxed at 6.5 percent. If a gallon of gas costs $2.50 before taxes, the price difference between Anchor Point and Homer based solely on taxes is 11 cents.
Under the same comparison, the difference in price between Homer and Anchorage, a city with no sales tax, is 16 cents.
Transportation costs on the Kenai Peninsula also are greater than in Anchorage, increasing the gap between the two communities.
Still, consumers can expect Alaska gas prices to continue to decline as long as there isn’t another pipeline leak or hurricane, Westfall said.
“It’s a matter of timing,” he said. “You’ll see it coming back down. Give it some time.”
Ben Stuart can be reached at ben.stuart@homernews.com.
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