An I-Team Investigation

If there's one thing everybody likes to complain about, it's the price of gas--especially here in Alaska. After all, if we've got so much oil, why isn't gas a lot cheaper?

Here's a shocker:

A lot of the gasoline that you put in your car wasn't made from Alaskan oil. We've got six oil refineries here in Alaska, including a Tesoro refinery in Nikiski, near Kenai. But the I-Team has learned one out of three barrels of oil processed here comes from overseas.

Clarissa Brown is like a lot of drivers shopping for gasoline.

"Well, usually I look at price first. So, like I said, price first and whatever's closer to home," said

Brown.

That's why she pulled-up to Cline's Tesoro at Fifth and Gambell. If you pay with cash, his is among the cheapest gas stations in town. But in a state that produces so much oil, a lot of people ask him why gas in Alaska isn't even cheaper.

"All the time (laughs) all the time they ask us that. My answer to that, all I can say is that they have refineries here and sometimes I use the word greed, you know. Because to me they're making a lot of money, you know," said Rich Cline of Cline's Tesoro.

Industry experts say that's not the whole story. It turns out, the amount of oil being produced on the North Slope and in Cook Inlet is dropping.

That's natural.

The older a drilling site gets, the less easily accessible oil remains. In 1988, the North Slope produced nearly 723 million barrels of oil. By 2005, that was down to 308 million. Workers brought 82 million barrels of oil to the surface of Cook Inlet in 1970. But just seven million barrels were extracted in 2005. So the Tesoro refinery on the Kenai Peninsula now has to bring in oil from overseas.

"And with the situation building the way it is, there's not a lot of relief in sight in terms of the day-to-day cost of gasoline.

When you have to bring in one third of the refining capacity at Tesoro from countries like Indonesia, Africa, Australia, that's an added expense," said Bill Popp of the Kenai Peninsula Borough's oil industry liaison.

At Cline's Tesoro, you can see the international markets at work. When the price of a barrel of oil goes up, Cline knows his supplier will charge him more just five to 10 days later.

"Well, seems like it goes up faster than it goes down, of course, you know. And we always try to watch---we watch a barrel of oil every day and if we see the barrel going up, we try to keep our tanks as full as possible," said Cline.

Yet when it's all said and done, he only makes 10 to 12 cents a gallon, no matter what the

price is. Three of his friends closed their Tesoro gas stations within the past year, unable to make a profit. Cline manages to stay in business because he also repairs cars.

"You know, I think they think we're all getting rich (chuckles). But we're just surviving, you know," said Cline.

Energy experts are worried about Alaska's long-term survival as an oil-producing state. It's believed there's undiscovered oil in Cook Inlet, but it's been a challenge finding companies that want to go get it.

"Cost is an issue. Rates of return are an issue. You know, big companies like the big three on the North Slope, they look for large opportunities to go out and explore for oil," said Popp.

Cook Inlet only has small to mid-sized reserves. But until they're extracted, Popp believes you won't see the benefits of living in an oil-rich state--at least not at the pump.

Popp says demand for gasoline also affects the price we pay. Alaska ranks 50th for gasoline consumption.

To contact Matt, call 907-273-3186.