Oil prices continue to widen state’s fiscal problem

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.

More in News

(Juneau Empire file photo)
Aurora forecast for the week of Feb. 19

These forecasts are courtesy of the University of Alaska Fairbanks’ Geophysical Institute… Continue reading

Juneau-Douglas High School: Yadaa.at Kalé students hold up signs during a rally along Egan Drive on Tuesday afternoon protesting a proposal to consolidate all local students in grades 10-12 at Thunder Mountain High School to help deal with the Juneau School District’s financial crisis. (Mark Sabbatini / Juneau Empire)
JDHS students, teachers rally to keep grades 9-12 at downtown school if consolidation occurs

District’s proposed move to TMHS would result in loss of vocational facilities, ninth-grade students.

Deven Mitchell, executive director of the Alaska Permanent Fund Corp., gives a tour of the corporation’s investment floor to Sen. Jesse Kiehl, D-Juneau, and other attendees of an open house on Friday. (James Brooks/Alaska Beacon)
Alaska Permanent Fund Corp. leaders approve proposal to borrow up to $4 billion for investments

Plan must be OK’d by legislators and Gov. Mike Dunleavy because it requires changes to state law.

Rep. Cathy Tilton, R-Wasilla, presides over a mostly empty House chamber at the end of an hourslong recess over education legislation on Monday. (Mark Sabbatini / Juneau Empure)
Tie vote kills early House debate on education funding

Lawmakers spend much of Monday in closed-door negotiations, plan to take up bill again Tuesday.

Gov. Mike Dunleavy announces his proposed FY2025 budget at a news conference in Juneau on Dec. 14, 2023. (Claire Stremple/Alaska Beacon)
Gov. Dunleavy proposes tax breaks for the private sector to address Alaska’s high cost of living

The Dunleavy administration’s proposal to address a crisis of affordability in Alaska… Continue reading

Lacey Sanders, director of the state Office of Management and Budget, presents Gov. Mike Dunleavy’s updated budget requests for this fiscal year and next to the Senate Finance Committee on Monday at the Alaska State Capitol. (Mark Sabbatini / Juneau Empire)
Small changes in governor’s proposed budget could mean big moves for Juneau

New plan moves staff from Permanent Fund building, opening space for city to put all employees there

(Michael Penn / Juneau Empire file photo)
Police calls for Sunday, Feb. 18, 2024

This report contains public information from law enforcement and public safety agencies.

Smokestack emissions into Fairbanks’ atmosphere are seen on March 1, 2023, from the University of Alaska Fairbanks campus. (Yereth Rosen/Alaska Beacon)
Alaska legislators give closer look at bill aimed at storing carbon emissions underground

Bill could enable enhanced oil recovery, sequestration of emissions from new coal-fired power.

(Michael Penn / Juneau Empire file photo)
Police calls for Saturday, Feb. 17, 2024

This report contains public information from law enforcement and public safety agencies.

Most Read