State’s revenue department predicts slow uptick in oil prices

An oil rig contracting for BP looms on the horizon at Prudhoe Bay this spring. Oil revenue still makes up the bulk of Alaska’s income, the state’s revenue forecast predicts that oil prices remain too low to cover the state’s budget for the foreseeable future. (Photo by Elizabeth Harball, Alaska’s Energy Desk)

Alaska’s Department of Revenue released its fall revenue sources book on December 12.

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Department of Revenue Commissioner Sheldon Fisher sent the book to Gov. Bill Walker’s office. And along with it, he sent a letter saying that while the state is forecasted to make more money this year than it did last year, it is still spending more than it makes.

The state continues to rely heavily on energy to fund government operation. That means oil prices are an important number in in calculating in the state’s future budgets. Next year, the Department forecasts an average price of $56 per barrel.

That’s up slightly from its spring oil price prediction. According to the report, oil markets seem to be stabilizing. The department expects annual prices to hold at about $60 per year for the foreseeable future.

But oil prices would likely need to be at least $90 per barrel to balance the budget next year.

Fisher wrote that he believes using a portion of the Permanent Fund’s investment earnings to pay for state government is necessary to balance the budget.

One bright spot in the prediction is that oil production has increased for the last two years. The Department of Revenue predicts that it will bump up again in 2018, before dropping in 2019.