There’s no good news for Alaska from the oil markets.
The state’s gap between revenue and expenses continues to deepen as the price of oil remains low, according to a new analysis released Tuesday by Fitch Ratings, a national firm.
Alaska isn’t alone — Colorado, Louisiana, New Mexico, Oklahoma, Texas and Wyoming all have state budgets based upon oil prices higher than current levels.
Alaska’s budget is based upon a forecast of oil averaging $67.49 per barrel and production of at least 500,000 barrels per day in fiscal year 2016, which began July 1.
In comparison, Texas’ budget is based on oil averaging $64.52. Colorado’s estimate, the highest in the country, is about $68, only slightly more bullish than Alaska’s latest figure.
“The revenue forecast is driven by an expectation of an average price of oil in the mid-$60s for the next 15 months,” revenue commissioner Randall Hoffbeck wrote in April.
In reality, average prices have been more than $16 lower.
According to state figures, the West Coast price of Alaska North Slope oil has averaged $51.08 per barrel since July 1.
The state had expected $2.2 billion in revenue this fiscal year — $1.6 billion of that from oil — but with prices this low, the state’s actual oil revenue will be closer to $1.2 billion, Hoffbeck told the Alaska House Finance Committee in August.
For every $5 decline in average oil prices, the state loses $120 million in revenue, Pat Pitney, director of the state office of Management and Budget, said at the same House Finance Committee meeting.
Worsening matters, North Slope production has averaged 466,931 barrels per day — about 6.7 percent below the spring forecast.
It should be noted that a large proportion of North Slope maintenance takes place in the summer, and average production is expected to rebound in the winter months.
That outlook calls for a barrel of West Texas Intermediate crude (usually a few dollars cheaper than Alaska North Slope oil) to average $53.57 next year.
That kind of price would cost the state hundreds of millions of dollars compared with its April estimate, money that would have to be made up through more spending from savings, greater cuts to services, or some kind of alternative revenue stream like taxes.