Thoughts on Alaska Oil & Gas

At the request of the (Anchorage Municipal) Budget Advisory Commission, yesterday (November 5) I made a presentation on Alaska Fiscal Policy.  When I was first asked to give the presentation the working title was “The need for implementing sustainable budgets.”  Due to dramatic changes since then in the oil markets, however, by the time I gave it yesterday the title was “Alaska Fiscal Policy:  Dealing with $90 $80 oil.” Continue reading →

Yesterday a friend asked me to sum up in a sentence my “closing statement” on this year’s state-level (Governor and  legislative) races.

The following — from a 2010 Wall Street Journal editorial looking back on the loss by the Republicans of the federal House of Representatives in 2006 — is what popped into my head: Continue reading →

ANS oil prices, which as most will recall drive 90% of the Alaska state government revenue, fell again Wednesday to $82.16 per barrel.

The current state budget, which already was $1.6 billion in the red when it passed, is predicated on oil prices averaging $105 per barrel.  (The breakeven price for the budget is roughly $117 per barrel.)

Each dollar change in the price of oil is equal to roughly $90 million in state oil revenues.  That means if oil prices for the year settle at $95/barrel, the budget deficit will grow to $2.5 billion, at $90/barrel to something approaching $3 billion, and at $85/barrel to something on the order of $3.4 billion. Continue reading →

Earlier this week, as part of the “It’s Our Future” campaign, we started running web ads that asserted simply, and correctly, that if those legislators who have voted for state budgets since 2012 are “allowed to continue spending Alaska’s money at the rate we are on, you can kiss the #PFD goodbye.”

We made equally clear that, in casting votes to continue spending far in excess of sustainable levels, those same legislators necessarily are “eyeing” the Permanent Fund earnings because, as the state’s best economic analysts have made clear there will be nowhere else for the state to turn to for revenues at a point in the not too distant future .

The reaction by some has been humorous, in a Greek tragedy sort of way.  Rather than deal with the statement on the merits, a few have resorted instead with variations of “you lie.”  I suppose when you don’t have the facts on your side that’s about the best you can do. Continue reading →

Click above to read ISER Web Note 14.

Two years ago the University of Alaska – Anchorage Institute of Social and Economic Research (ISER), the state’s best economic think tank, said this:

“Right now, the state is on a path it can’t sustain. … Reasonable assumptions … suggest we do not have enough cash in reserves to avoid a severe fiscal crunch soon after 2023, and with that fiscal crisis will come an economic crash.” ISER also offered a solution.  “What can the state do to avoid a major fiscal and economic crisis? The answer is to save more and restrict the rate of spending growth. All revenues above the sustainable spending level of $5.5 … would be channeled into savings.”

Continue reading →

Alaska’s fiscal dilemma in a nutshell (and an opportunity to learn a lot more about it) ….  To learn more about the event, click here.

While it has happened occasionally since prices recovered from their 2008 crash lows, Monday was the first time in awhile that ANS oil prices have fallen below $100/barrel. The occasion seemed an appropriate time to check in on where price forecasts are headed generally in the current market environment. Continue reading →