JUNEAU — The state Department of Revenue predicts an increase in oil prices next year will provide Alaska with hundreds of millions of dollars in additional revenue.
The department’s tax division released its semi-annual report on the state’s fiscal climate last week. Tax officials expect oil prices to rise over the next few years, but the state will still have to find other ways to close its multibillion-dollar budget deficit.
The revenue department forecasts average oil prices will jump from $46.81 per barrel this fiscal year to $54 per barrel next year. Prices aren’t forecast to exceed $88 within the next 10 years, Alaska’s Energy Desk reported.
Tax officials also expect a drop in North Slope oil production by about 35,000 barrels between fiscal 2017 and fiscal 2018.
“A good rule of thumb for Alaska at the range of prices we’re at right now is every dollar in the price of oil is worth about $30 million,” said Alaska Tax Division Director Ken Alper.
Alper said an expected $300 million revenue boost from the higher oil prices next year is “substantial” but not enough to balance the state budget.
The increase in oil prices would also keep Alaska above the oil industry’s break-even point of around $45 a barrel. When the state is below that threshold, the major producers on the North Slope start losing money. Those operating losses then turn into credits the companies can use to offset taxes they owe to the state.
“That phenomenon falls off a little bit, and we now are starting to see a couple hundred million dollars in production tax revenues in the near future,” Alper said. “Not the billions that we had in the past when prices were higher, but at least not zero.”
