Price Parity

The price of gasoline in the lower-48 has dropped an estimated 60-cents, in less then a month and trends indicate the slide will continue. So why are the damn gas pump meters in Alaska “Stuck” at all time highs, maybe frozen due the early cold spell at all time lows? I have not seen but maybe a 1-cent savings, and even though we know Alaska lags behind when it comes to common sense, what gives? OK, so when you have a local refining infrastructure like is found in North Pole, it controls the price of gasoline. With two-refineries in operation at the end of Santa Claus Lane, that refining infrastructure could take crude oil from the Trans-Alaska-Pipeline and fulfill most of the gasoline market requirements found throughout Alaska. Now the state sells some of its “Royalty-In-Kind” crude oil at a discount to the refiners – discount meaning it is a guaranteed “contract” source for many years so works wonders with the show & tell we need a loan, with the intent this preferential treatment will provide relief to the consumers' wallet. See, we could just sell all of our oil up front to BP, and the hell with the local refineries - not the case, and we would make more money for that PFD distribution by just outright selling it. So the sale is done for a purpose, to help soften the blow of outrageous energy costs here in a state that at one time reigned as “King” of the oil producing states! But within that “RISK” contract there exists stipulations, called the “Price Parity” which makes sure that there is some semblance of equality in pricing between Anchorage and Fairbanks, as Anchorage has no refineries. A good deal all around as the state's oil is a resource belonging to all, so it must be bartered with that in mind, to offset any disparity. What is good for Fairbanks must also be good for Anchorage, which when under control should see a ripple effect that benefits all Alaskans in one way or another – as this “price parity” does invest itself in the economics of jet fuel and other transport costs, like for booze and diapers. And because Anchorage and Fairbanks are the “major hubs”, it works quite well the equation of price equality for all – at least that was the intent. But when Flint Hills Resources decided to abandon the major refinery in North Pole, which is in a “shut-down moth-ball” phase as we speak, all the refined gasoline had to be shipped from the Tesoro refinery down Kenai way or imported, thrown aboard Bill Sheffield's rail and transported North. So there came added costs associated with this refined product getting to the interior, instead of a short joy ride when locally produced. And even though a refinery shuts down and jobs are lost, the state of Alaska RIK contracts are still in effect! Flint Hills merely allows Tesoro to refine the 30000 barrels of oil allowed by contract on a daily basis, now that it can no longer process the same with the “moth-balling”. So there is an added cost. Like for shipping the oil from Valdez over to the Cook Inlet, and then the “Price Parity” now works in reverse, as it costs more to get this much needed commodity to the interior - yet Anchorage suffers due the “parity” requirement as there can be only a 1-cent difference in the wholesale pricing, or else it could mean a contract violation. Basically, by not having a refinery in the interior that helps soften the blow and caters to a multiple-supply and demand scenario, those in Anchorage are at the mercy of, well I am lost for words making sense. So don't expect to see the price of gasoline slide like it is supposed to with crude oil on the slide, it just won't work here in Alaska due the fact Alaska owns a share of the oil – no attention to reduced prices at the pump for at least 90-days, maybe an entire year the way the contracts are written. Yes, Anchoragites are once again subsidizing the interior by paying higher prices at the pump, just like how CEA coop members have been doing the same for many years by subsidizing electricity for our northern neighbors. Yes, if you are a member of CEA, the cost you pay for electricity finds a burden for subsidizing the power sent up north! Look, corporations employ Wall Street crooks to find every which way to save a penny here, a penny there. A few pennies detoured their way on a gallon, when millions of gallons are at stake, a penny saved equates to a whole lot earned! But the sad fact of the matter, why in hell does a world class refinery in close proximity to a supply of oil sold on the cheap, why cannot it find the economic means and know-how to continue operations - it is beyond me, so it is suspicious. And with all the “Think Tank” economic expertise that hangs around the University of Hoffa over there by College Hill, not one individual with knowledge has come forward with a theory as too why this is all happening, and all we hear is a blame game based on being responsible for past polluters. Look, if you didn't do it go to the Supreme Court if need be. Why in hell a corporation that wants to try and make a go of things in a tough economic environment is held responsible for someone else dumping goes to show we have some very skewed laws. I mean, if Martians take over, are they responsible for “Global Warming”? See, it was the past owners of the refinery that polluted the North Pole aquifer, with a nasty gasoline formulator called “sulfolane”. Williams Brothers went bankrupt, and Flint Hills came to the rescue to keep the operation going – but failed to inform those in the know that they had nothing to do with the pollution. And Williams owns major real estate down in the lower-48. Make them sell it off to pay for this atrocity in North Pole! It is that simple so is bothersome as to why it works the way it is not supposed to work. OK, it is all so clear. No different then what is happening to Obama. George W. caused a list of egregious problems for this nation, and today Obama gets blamed! Obama takes over so takes over the pollution caused by others that should have known better in the first place. I guess no different then the U.S. Taxpayers continuing to pay up for atrocities upon the Native Americans, premeditated over 200-years ago. I wasn't there, why do I have to continue to be punished? Same with Obama, punished just because we have lost touch with “Trust”. And Flint Hills tried to convince the state authorities that it did not have its finger on the trigger of the gun that shot a bullet hole in that hazardous chemical tank that leaked into the aquifer that finds now a non-stoppable plume heading toward the Tanana which will pollute the river and contaminate the fish, and I will be on the hook once again for spoiling the ways and means of the subsistence cultures that rely on the fish. Neither I or Flint Hills were even close when this happened, yet they get blamed and over time I may get to share in some of that blame. “But for” now for some insane reason, they are responsible. Who makes up these crazed laws? So Flint Hills has shutdown and is now moving out, but has devised another way to keep the refined products market alive and well. Yes, by turning its North Pole tank farm into a distribution only interest, wherein refined products are purchased elsewhere - and they continue to make the same damn profit, maybe more. Look, the demand remains the same, it's not like Fairbanks is closing up shop! Can't blame Flint Hills, just keep blaming the the wrong guy or gal and they will finds ways to get around the blame and make a profit, just like Obama continues to be on the “blame” yet continues to gain “Political Capital” and at the same time increasing the “Parity” between himself and Congress. Hum, maybe Flint Hills learned from Obama....in the meantime, continue to dish it out at the pumps!