The pandemic, which once led to negative Alaskan oil prices, is now a driver of $ 1.2 billion in profits this year, according to Treasury Department officials.
A preliminary version of the Treasury Department’s annual fall forecast, released Oct. 29, says the state of Alaska will be nearly $ 1.2 billion more this fiscal year and nearly $ 1.4 billion more in 2023 will pick up in 2021, mainly due to higher oil prices.
Alaska North Slope crude oil ended October 19 at $ 85.63 a barrel, well above the average price of $ 61 a barrel for fiscal 2022 set by tax authorities last spring. The average price for 2023 is forecast at $ 76 per barrel.
The price of Alaska oil went briefly in the red in April 2020 after the global outbreak of the pandemic.
Overall, Alaska is expected to see nearly $ 6 billion in unrestricted revenue this fiscal year, and more than 6.1 billion in 2023, or POMV, formula lawmakers in 2018.
“The recent oil price hikes have significantly improved our current budgetary position and I am pleased to announce that the prospects for Alaska’s budget are good,” said Finance Commissioner Lucinda Mahoney in a formal statement. “We are optimistic about the current oil price and production trends.”
A day before the preliminary earnings forecast is released – it is usually released in early December – Governor Mike Dunleavy urged legislature leaders to review his proposal to pay additional dividends from the Permanent Fund so that this year’s grand total matches what would be underpaid his “50-50” budget. This plan would pay out half of the Permanent Fund’s income to be spent annually in PFDs.
“The state is now running hundreds of millions of dollars in additional taxes on oil production as Alaska residents – recovering from job losses and the economic slowdown of the pandemic – now face rising energy costs,” Dunleavy said in a statement.
Legislators skeptical of a dividend payout of the order Dunleavy is skeptical of have regularly found that the state had largely balanced budgets in recent years before PFDs were paid. Paying dividends under the governor’s plan would cost approximately $ 1.5 billion a year and increase from then on.
Treasury officials used the median price of Brent benchmark oil futures trading in the five days ending October 26 to make their estimates for 2022 and 2023, the preliminary forecast said. However, this is where the connection to the oil futures markets ends. The prices forecast for the next fiscal year are based on futures prices for 2023, which are rising at an assumed inflation rate of 2% per year, which would bring the oil price to around $ 88 per barrel according to the forecast in 2030.
Publicly available futures prices compiled by CME Group, a Chicago-based commodities marketplace,
is gradually declining from a current high of $ 80 per barrel to $ 71 per barrel per year and $ 65 per barrel by the end of 2023. Futures for December 2024 are currently trading at $ 61 per barrel, according to the CME Group.
Oil industry analysts have said the futures market suggests that the short-term oil supply shortage – resulting from the sudden global industry slowdown in 2020 due to the pandemic – will end and oil markets will return to their general pre-pandemic equilibrium at $ 60 – $ 65 per barrel range.
Department of Natural Resources officials tasked with forecasting the state’s oil production also expect the recent surge in oil prices to result in higher levels of production on the North Slope, albeit relatively short-lived. Last spring, DNR’s production forecasters estimated that North Slope operators would average about 471,000 barrels a day this year and nearly 489,000 barrels a day next year, with production gradually rising to nearly 580,000 barrels a day by the end of the decade Day would increase.
Production is now expected to average 488,000 barrels per day this year and just over 500,000 barrels per day next year, with production growing more slowly to 541,000 barrels per day by 2030.
Since the spring forecast was released, this project has likely been delayed for several years by a successful legal challenge to ConocoPhillips’ large Willow project. Willow’s first oil was once slated for 2025-2026. Oil Search Alaska has also identified significant problems funding its Pikka development, which is the other large-scale project that many believe will eventually support a sustained increase in North Slope production.
Elwood Brehmer can be reached at [email protected].