Alaskans suffer nation's highest gasoline prices

ANCHORAGE, Alaska (Reuters) - Think you're feeling pain at the gas pump? Consider the residents of Lime Village, Alaska, an isolated Denaina Athabascan Indian community where gasoline prices have hit $8.55 a gallon.

The price is severely curtailing movement around the interior Alaska village, where four-wheelers are sitting idle, said Ursula Graham, administrator for the Lime Village Traditional Council.

"Nobody's going on joy rides, that's for sure," Graham said.

Alaska, despite its status as a major crude oil producer, has the highest average gasoline prices of all U.S. states, according to the American Automobile Association. Alaska prices averaged $4.65 a gallon for regular gasoline on Friday, compared with a national average of $4.10, according to AAA.

Neal Fried, an economist with the Alaska department of labor, said the ironic situation reflects the hard reality that the state's small population hinders economies of scale and market competition.

"Even if you take all of Alaska into account, it's a pretty small marketplace," he said.

High oil prices have helped the state government, which relies on oil taxes, royalties and fees for at least 80 percent of its general operating revenue. Alaska reaped more than $10 billion in oil revenue in the just-completed fiscal year, double the oil revenue of the previous fiscal year.

Fried noted that North Slope oil development is bustling, which would not be the case if oil were $30 a barrel.

"There are more people working on the Slope than we've ever counted before," he said.

But high fuel prices pinch individual Alaskans, especially in rural areas with no outside road access, where shipments of petroleum products require extraordinary and costly efforts.

DOG SLEDS

Fuel that goes to Lime Village is sent 1,800 miles by barge from Anchorage to the southwestern Alaska hub of Bethel, transferred to another barge for a trip up then Kuskokwim River and then flown by small plane to its final destination. Of a representative sample of Alaska communities, Lime Village had the highest fuel prices, according to a recent University of Alaska Anchorage study.

Gov. Sarah Palin has proposed using some of Alaska's fat budget surplus to send one-time $1,200 energy-relief checks to all state residents, to suspend the state's 8 cent-per-gallon gasoline tax and other measures for immediate assistance.

The legislature is considering her request in an ongoing special session.

Meanwhile, in Lime Village, boat trips on the Stony River are fewer and more carefully planned. Villagers combine tasks such as checking fish nets and collecting firewood, Graham said.

One man even moved his fish camp, smokehouse and all, from an outer area to the midst of the village so that he could avoid the boat trip entirely.

Residents like the idea of a $1,200 payment from the state, Graham said. But long-term solutions remain elusive.

"Going back to dog teams is an option," she said. "It's kind of a joke, but not a joke."

(Reporting by Yereth Rosen; Editing by David Gregorio)