The owners of the Alaskan pipeline have asked the Federal Energy Administration to approve a pipeline tariff of $5 a barrel, a move that could raise the price of Alaskan oil to $17.40 a barrel on the West Coast.
The pipeline owners also have asked for an $8-a-barrel fee for Alaskan oil that the West Coast does not need. That oil would be tanked through the Panama Canal to the Gulf Coast, where it would be pipelined north to Midwest markets. A shipping fee of that size could raise the price of oil to $20.40 a barrel in the Midwest.
If accepted and approved by the FEA, these prices for Alaskan oil would be almost $4 a barrel higher than imported oil costs on the West Coast and more than $7 a barrel more than it now costs in the Midwest.
The request for a $5-per-barrel pipeline tariff was outlined in a notice issued yesterday by the FEA on Alaskan oil pricing procedures. The notice was designed to draw attention to hearings on Alaskan oil prices, to be held by FEA March 21, 22 and 23 in Washington, San Francisco ad Achorage.
Included in the hearing notice is a new estimate by FEA that as much as half the 1.2 million barrels of oil to be shipped from Alaska every day will be surplus to West Coast needs, meaning it will have to be exported to Japan or shipped through the Panama Canal to the Gulf Coast.
The reasons given by FEA for the new surplus estimate range from a slowdown in economic activity to an unantiuipated increase in West Coast oil production. The FEA said that higher prices for oil may have provided the incentives for West Coast oil companies to increase output.
The FEA hearings will be held so that oil companies can justify their price requests, so consumer groups can challenge them, as the FEA itself can decide what it believes will be the fairest prices for Alaskan oil.
Alaskan oil will begin to flow through the pipeline from Alaska's North Slope to the southern port city of Valdez in August or September. The first flow will be at a rate of 600,000 barrels a day, doubling to 1.2 million barrels a day by December.
If the FEA treats Alaskan oil as "new" domestic oil, the companies could receive a wellhead price (before it gets pumped into the pipeline) of $11.64 a barrel, the same price as new domestic mainland oil. Adding a $5 pipeline tariff and a 76-cent tanker charge to take the oil from Valdez means $17.40 a barrel for oil delivered to Long Beach, Calif.
That would be $3.66 a barrel higher than the price charged today for foreign oil coming into the same West Coast port.