Liz Hampton, Jennifer Hiller | Reuters
Alaska, New Mexico and other states that benefited most from the nation’s energy boom may soon need to patch holes in their budgets due to a 45% dive in U.S. crude prices this year and spending plans built on much higher prices.
Revenue from oil taxes and state leases have been at risk for weeks as oil prices slid on fears that economic fallout from the coronavirus outbreak would dent global demand. Then on Monday, oil had its biggest one-day drop since 1991, as Saudi Arabia and Russia pledged to pump full bore to regain share lost to U.S. shale producers.
U.S. crude futures sank on Monday as low as $27.34 a barrel, far below estimates when state budgets were set last year. Texas had forecast about $58 a barrel, Alaska $66 for North Slope crude and Louisiana estimated $55 a barrel. All estimates are at least $21 above current levels for those grades.
Alaska, which gets about 34% of its operating budget from oil, on Monday imposed a hiring freeze and out-of-state travel ban, citing the hit to state finances from oil price drops.
The state already was facing a $1.5 billion budget deficit, said Mouhcine Guettabi, an economist with the Institute of Social and Economic Research at the University of Alaska Anchorage.