Although most drivers welcome relief at the pump, they may want to hold off on the celebration. Roger Marks, a longtime petroleum economist, says this is not a good sign for Alaska’s bottom line.
“If these kind of prices at $60 or so were to last for six months or longer, I could easily see a recession happening here,” Marks said.
He says the tables are turning, and they’re not in Alaska’s favor. Oil prices have tanked to a new five-year low at $65 a barrel.
“The future is unknowable how long this will last or what exactly will happen,” Marks said.
Alaskans shouldn’t panic just yet, says Kara Moriarty with the Alaska Oil and Gas Association, whose member companies represent most of the oil industry. This is the nature of the business, she says.
“As the industry, they’ll make adjustments as prices go up and prices go down,” Moriarty said. “And so that’s why we need to create a stable and competitive environment.”
She says Alaska’s new oil tax structure will help get the state by.
“The state is actually making more money today at these lower oil prices because we have a new tax regime,” she said. “The old tax system did not protect the state when prices go down to the levels that we’re seeing today.”
But it could mean oil companies will have to scale back, she says.
“It can be concerning, because that means there’s less capital dollars for the companies to spend,” she said. “So there will be capital constraints moving forward.”
For now, though, next year is on track. Moriarty predicts 2015 will be “a very positive year,” due to new projects and new investments.
Still, Alaska will likely be making some tough budget decisions come next year, to prepare for what could be a looming deficit.