Commissioner Designee Bruce Tangeman presents the state’s revenue forecast to the Senate Finance Committee at the Capitol on Wednesday, Jan. 16, 2019. (Michael Penn | Juneau Empire)

Commissioner Designee Bruce Tangeman presents the state’s revenue forecast to the Senate Finance Committee at the Capitol on Wednesday, Jan. 16, 2019. (Michael Penn | Juneau Empire)

Volatile oil market prompts conservative forecasts

Revenue expected to dip with market

New Alaska Gov. Mike Dunleavy’s administration is taking a more conservative approach to oil revenue forecasting to help avoid the creation of an oversized budget.

New Department of Revenue Commissioner Bruce Tangeman delivered a presentation on revenue forecasting to the Senate Finance Committee on Wednesday morning.

The presentation highlighted the volatility in the oil market. At the beginning of October, the price of oil peaked at more than $75 per barrel, a four-year high. Tangeman said this was followed by a “pretty large gyrations” in the market through the rest of October and November.

[Dunleavy unveils plan for PFD back payments]

Since then the market has calmed, and as of Wednesday, the price of Brent Crude oil was $61.33 per barrel. Brent Crude is an oil standard that is considered intermediate in quality.

Tangeman said these “wild swings” are why the Dunleavy administration is now using an oil revenue forecasting model developed in the spring, which places oil prices around $64 and $65 a barrel for the next few years.

The previous model placed oil at $75 per barrel in the current year with a slow trickle downward that leveled off at $70 a barrel in 2021.

A more conservative forecast will make for conservative budgeting moving forward. In fact, oil revenues for the general fund are expected to dip in the coming fiscal year from $2.211 billion in the current year, to $1.688 billion or about $523 million or 23.6 percent. Oil revenues totaled $1.941 billion in fiscal 2018.

“It does reflect how important it is to use a more conservative number,” Tangeman said of the recent upheaval in the oil market, in a phone interview. “If the oil price does go up, great.”

[Infographics: Alaska’s 2019 Budget]

The ever changing economy that relies heavily on oil and other natural resource production in Alaska also highlights the need to get spending under control, as far as the Dunleavy administration is concerned.

“We feel we need to get our house in order,” Tangeman said in the phone interview. “First we need to drive down the cost of government.”

“His overall take is how big a government do we need regardless of the revenues,” Tangeman added.

Dunleavy’s amended budget is expected to be unveiled by the 30th day of the session, so it could be released by mid-February.

Capital expenditures on the North Slope

Tangeman’s presentation showed Capital investments by oil and gas companies are forecasted to increase in coming years, from $1.446 billion in fiscal 2018 to about $3.122 billion in 2021. This is due to new oil developments, the Pikka and Willow oil fields, that are expected that are expected to start pumping oil down the pipeline in the not too distant future.

Sen. Natasha Von Imhof found this encouraging.

“Very encouraging news to see new investment in Alaska,” the Anchorage Republican, who co-chairs the Finance Committee, told the Empire. “… This increase in investment, I would suspect, is going to be yielding new jobs.”

Finance Committee members

Co-chair Sen. Bert Stedman, R-Sitka, said this finance committee is larger than those of the last decade to address the complexity of the budget. Other members include co-chair Sens. Natasha Von Imhof, Click Bishop, Lyman Hoffman, Mike Shower, David Wilson, Peter Micciche, Donny Olson and Bill Wielechowski.

Contact reporter Kevin Baird at 523-2258.

Volatile oil market prompts conservative forecasts

More in News

Image via Alaska Board of Fisheries
Statewide shellfish meeting rescheduled

This comes after the board bumped back its Southeast and Yakutat shellfish meeting

A State of Alaska epidemiology bulletin can be found at
State updates STI protocol after reported drop

The state has been experiencing an outbreak since 2017

The Kenai Fire Department headquarters are photographed on Feb. 13, 2018, in Kenai, Alaska. (Peninsula Clarion file)
Police identify remains found in burned car

Kenai Police and Fire departments responded to a car fire at Beaver Creek in Kenai on Jan. 7

Alaska Gov. Mike Dunleavy addresses members of the press on Monday, Jan. 17, 2022, in Juneau, Alaska. (Screenshot)
Dunleavy talks upcoming session, lambasts media

In a press conference Monday, Alaska Gov. Mike Dunleavy discussed his goals… Continue reading

Courtesy photo / Juneau Raptor Center
This golden eagle was rescued by the Juneau Raptor Center over the summer after being found weak and thin.
Rescue center, birdwatchers look back on 2021

Juneau Christmas bird count was way down this year.

This satellite image taken by Himawari-8, a Japanese weather satellite operated by Japan Meteorological Agency and released by National Institute of Information and Communications Technology (NICT), shows an undersea volcano eruption at the Pacific nation of Tonga Saturday, Jan. 15, 2022. (NICT via AP)
Tsunami advisory issued after eruption

An undersea volcano erupted Friday near the South Pacific island of Tonga, triggering concerns of damaging waves across Pacific coastlines

Flowers bloom at Soldotna City Hall on Wednesday, June 24, 2021 in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Multiple public works projects underway in Soldotna

Soldotna City Council received an update on eight different projects

COVID-19. (Image courtesy CDC)
Hospitalizations rise as state reports increase in COVID cases

There were a total of 112 COVID-related hospitalizations in Alaska as of Friday

Most Read