Bogged down in multiple-year, multi-billion dollar state budget deficits, Alaskans have been nervously watching North Slope oil production and hoping for an uptick.

They’ve largely forgotten about oil prices, the other side of the state oil revenue equation.

The news is not good, at least for the budget.

For consumers, however, it’s good news because it means lower fuel prices, although those prices are usually “sticky,” meaning they don’t fall as quickly as crude oil.

Alaska North Slope crude oil prices have been declining steadily since July, from about $111 per barrel in early July to about $91 per barrel on Oct. 3.

A drop in oil prices costs the state treasury in lost revenue, state Revenue Commissioner Angela Rodell says, and this would basically add to the expected $1.4 billion budget deficit that is projected for the fiscal year.

That estimate of the deficit assumes a $104 per barrel average price for fiscal year 2015, which began July 1.

However, some good news is that state revenues are better off under the state’s new oil production tax, the More Alaska Production Act upheld by voters in the Aug. 19 primary, than they would have been under the previous state oil tax, known as ACES.

“We are much better protected under MAPA than we would have been at these oil prices,” Rodell said. MAPA has a fixed tax rate of 35 percent while the tax rate under ACES fluctuated with changes in oil values and as oil prices drop the ACES tax rate would have dropped quickly.

At $90 per barrel, ACES would bring in about $3.08 billion. Under MAPA, revenues would be $3.22 billion, according to an analysis by the Revenue Department.

Rodell said oil production on the Slope is also picking up after it had dropped off during the annual summer maintenance season for North Slope facilities.

“You can see production picking up steam, and that’s comforting as well,” she said.

What’s pushing down oil prices is more oil supply, particularly in the U.S., and lackluster demand for oil on world markets. The stronger U.S. dollar, which is the currency used for oil trading, is also a factor, Rodell said.

As for the selling price of North Slope oil, Rodell said that more lighter-grade Bakken shale oil is showing up in California, and that is undercutting the market for Alaska on the west coast.

ConocoPhillips’ shipment of a cargo of Alaska North Slope oil to Korea rather than the U.S. west coast is another signal. Despite the longer sailing distance from Valdez to South Korea — about three times longer — the company said the higher margin for oil it would get compared with the west coast more than offset the higher cost of shipping.

“California is starting to use Bakken oil, and we’ve seen greater demand for it, but it’s important to note all the indices are converging,” to Alaska’s disadvantage. “Brent (crude oil) is down, WTI is basically holding, and ANS has come down. Our oil is priced off Brent as a waterborne cargo. There’s also the slowdown in Asia demand, particularly in China,” Rodell said.

Greg Sharenow, executive vice president at Pacific Investment Co., voiced similar views in comments Bloomberg News.

“You’re seeing pretty good in oil supply and that’s weighing on the market,” Sharenow told Bloomberg.

The International Energy Agency has meanwhile reduced its outlook for oil demand growth, and also cited increased exports from Libya and U.S. domestic production.

Bloomberg also reported that oil production by 12 producing nations in the Organization of Petroleum Exporting Countries, or OPEC, rose by 413,000 barrels per day to 30.93 million barrels per day in September, the highest level for OPEC in the last year.

Significantly, Saudi Arabia, a key producer in the OPEC group, has declined to cut production to shore up prices and instead cut its price by $1 a barrel, a signal that the Saudis are more focused for now on maintaining market share than propping up prices.

The last time Saudi Arabia decided to go for market share over sustaining prices, at least in a significant way, was in the late 1990s. The move caused a cascade of oil price drops as producers competed to lower prices and maintain market.

The end result was a drop in oil prices, including Alaska’s, to about $9 per barrel in 1998.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.