The state of Alaska wants oil prices high.
“Every dollar change in price is close to 100 -150 million dollars in state revenue,” said acting Revenue Commissioner Angela Rodell. “Short term volatility like you’ve been seeing in the past few weeks, given things going on around the world, create a lot of distractions.”
The recent coup in Egypt gets all the headlines is not the reason for the jump, said Frank Verrastro. Verrastro, a senior vice president at the Center for Strategic and International Studies, said fears over control of the Suez Canal are legitimate.
Other conflicts, he said, are having more tangible effects.
“The Iraq Ceyhan Pipeline has been down, and that’s reduced exports out of Iraq. There’s been problems down in Basra,” he said by phone Monday from Washington. ”Syria, Yemen, Nigeria, and the fact that Libyan production is down 600,000 – 700,000 barrels a day.”
All this means that Alaska has little control over a global commodity. High oil prices translate to higher fuel costs, especially in hard to reach rural Alaska.
Throughout western Alaska, villagers are ordering and stockpiling hundreds of gallons of heating oil for the winter.
Bob Cox, vice president with Crowley Maritime Corporation – the company that barges refined oil products to western Alaska, said there are about three weeks left for the final barge of the season to make the journey.
The company stores the fuel in tanks throughout the state. Both Crowley and other companies sell the fuel to villagers.
Cox said the company monitors global oil prices to get the best price, and this year, it tried something new: Buying 300 thousand barrels of heating oil from China.
“That arrived off the west coast of Alaska in July. We offloaded that and brought that into our tank farms because that was a better value at that time, then U.S. prices,” he said.
The company still needs to finalize its price for the final barge.
Crowley uses the price per barrel the day the barge is loaded in its calculation for final prices. Cox says about one-third of Crowley’s cost is overhead, distribution, profit and transportation – the rest is the product.
“So we’re somewhat hostage to whatever is going on in the oil markets at the time we’re loading the barges,” Cox said.
Oil prices have been higher before: They hit $120 a barrel when the Arab Spring erupted.
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- The gap is about $200 million less than it was before state officials updated their forecast last week.