ANCHORAGE, Alaska (KTUU) — Rising crude oil prices in recent months have helped spur a boost in production on the North Slope, but some economists say the trend is unlikely to hold.
“My sense of things is that probably they’re not going to be much higher than they are now, at least for a very long time, unless some other low-probability event sneaks up,” said petroleum economist Roger Marks, referring to North Slope production numbers.
“The long term trend for Alaska, even with these new fields coming on, the long-term trend in production at least at best might be staying stable.”
According to Alaska Office of Management and Budget director Pat Pitney, added revenue from rising oil prices has only had a marginal effect in narrowing the state’s budget deficit compared to spending cuts and the use of Permanent Fund earnings to fund state government.
“It’s not significant. It helps on the margin, it definitely is good news, but it is not significant in terms of solving the stability problem of our budget,” Pitney said.
Increased oil prices provided relief to the tune of about $200 million for the operating budget this fiscal year, and that impact could change drastically if oil prices fluctuate even a little.
“Tomorrow, if prices go down to $61 or $59, that $700 million deficit goes to a billion dollar deficit,” Pitney said. “And we are down to just over $2 billion in remaining savings.”
Marks says it’s impossible to predict exactly where oil prices will head in the near future. Crude prices on Wednesday tumbled in response to news that OPEC countries like Libya and Saudi Arabia are considering ramping up oil production.
Furthermore, a recent report by the Division of Economic Development found that trade tensions between the U.S. and China could also have an indirect impact on crude prices. That report finds that tariffs between the U.S. and China could result in a slowdown in global trade, which would further erode demand for crude to fall.