Rural Alaska fuel prices could hit $25/gallon, lawmaker warns

Rural Alaska communities could see fuel prices climb as high as $20 to $25 per gallon in the coming months, a state senator warned Friday during a floor speech about rising fuel costs.

State Sen. Lyman Hoffman told the Alaska Senate that Bethel's fuel index price has jumped from $1.92 per gallon to $5.42, while pump prices that were already at $6.72 are projected to exceed $15 per gallon soon. Hoffman said the global fuel shortage is affecting suppliers' ability to access fuel. Prices are expected to continue rising.

Western Alaska could face up to $500 million in additional costs this year if fuel prices increase by $5 per gallon, according to analysis presented by Gwen Holdmann of the University of Alaska Fairbanks Alaska Center for Energy and Power. The region consumes between 90 million and 100 million gallons of liquid fuel annually. Each dollar-per-gallon increase adds roughly $100 million in costs.

"Our communities are experiencing unprecedented spike in fuel prices," Hoffman said, reading from an Alaska Public Interest Research Group report dated April 29. "Unlike areas along the road system, rural communities rely on delivery of fuel and are especially vulnerable to supply distribution."

Holdmann presented the consumption and cost analysis to a House committee examining rising fuel costs. Her figures show that a $5 per gallon increase would cost western Alaska between $450 million and $500 million annually.

Hoffman referenced the ongoing U.S.-Iran conflict that began in late February as a factor in fuel price increases. Communities off the road system face particular vulnerability because they depend entirely on fuel deliveries and must absorb transportation costs.

Some rural communities are already paying up to $17 per gallon for diesel, according to the Alaska Public Interest Research Group report. Suppliers are warning of potential increases of 30 to 50 percent. Japan and South Korea have implemented voluntary export controls that have cut traditional refinery sources for western Alaska.

In Kotzebue, heating oil prices have already reached $8 per gallon, a level residents describe as difficult to sustain, according to an Alaska Economic Report dated April 30 that Hoffman cited. Further increases are expected.

Hoffman said rural legislators are considering potential legislation to address rising fuel costs, though he noted that specific proposals remain under discussion. The Alaska Federation of Natives has recommended expanding the Bulk Fuel Revolving Loan Fund and supporting the Alaska Heating Assistance and Power Cost Equalization programs.

"It is going to be a long and hard winter that western Alaska is going to face again," Hoffman said.

The Senate met Friday morning for a brief floor session that included approval of a disaster declaration extension for the 2025 West Coast storm. The Senate also accepted an invitation from the House to meet in joint session Monday, May 4, to vote on overriding the governor's veto of Senate Bill 64 concerning elections.