The state budget for Alaska’s next fiscal year hasn’t been enacted yet, but the expectations for oil revenues could already be outdated.
On Tuesday on Tuesday, The U.S. Energy Information Administration has raised its expectations for the price of oil during the second quarter of the year, and into 2024. The new estimate was announced just two weeks following Saudi Arabia announced it would cut its production of oil by 1 million barrels per day.
The EIA currently estimates that Brent crude, the most important indicator of the price of oil — will be at $79.54 per barrel during the remainder of the year. Then, it will be $83.51 per barrel for next year since a lower supply will increase prices.
EIA admitted that its forecast is accompanied by “significant uncertainties” regarding the global economy’s growth as a key driver for demand for oil.
The price of a barrel North Slope oil was worth $75.75 per barrel on Monday. That was about a dollar less than Brent. Brent price. Both prices are closely related.
The budget for Alaska’s 12 months beginning July 1 anticipates to see North Slope oil prices will average $73 a barrel during the course of those twelve months. Oil revenues comprise around two-fifths or more of Alaska’s general-purpose state revenue, and is the second largest source of this revenue, in comparison to only a payment to the Alaska Permanent Fund.
If the prices are higher than the threshold for revenue If the budget is insufficient, it includes the “waterfall feature” that automatically deposits certain of the extra income to the State’s Constitutional Budget Reserve.
A portion of the extra earnings could also be put aside to boost the yet-to-be-set the 2024 permanent Fund dividend.
Forecasts for oil are notoriously unstable. In April, the EIA forecast for oil predicted the price of $85 this year, and $81 in the next year. That dropped in the forecast for May to $79 in 2023. It will then drop to $74 by 2024.
The oil revenues of Alaska are more uncertain since it is contingent on the quantity of oil being produced by the North Slope and estimates of the amount of money that companies will be able to claim tax deductions.
The windfall provision in itself is not certain, either. Gov. Mike Dunleavy has yet to approve the budget for this year into law. The governor is able to veto the section in the budget possibly eliminating the entire section which would leave the surplus earnings up for debate in the future by legislators.
The story was originally published in Alaska Beacon and is republished here with permission.
