This isn’t the time of year for rollercoasters but it’s looking like this year is an exception. I by no means claim to be a tariff expert or a stock market analyst or an oil price authority, but I do want to advise you to hold on to the safety bar across your lap. This ride has an end. Resist the doom and gloom and keep your chin up.
Perspective is key
Here’s some perspective that might help your churning stomach. We had worse single-day drops in the Dow and S&P 500 in March of 2020 and November of 2008 than we had last week.
As far as oil prices, when they take a downturn, fuel costs for transportation are great; here in Alaska, however, where oil revenues provide for our state budget, it’s not so great.
Watching the trends
Even so, we must remember that we’ve had worse oil price declines than the estimated 2-day 15% drop a few days ago. Do you remember when the price plummeted from over $130 per barrel mid-2008 to $39 in early 2009? I do. What about the 70% decline between mid-2014 and early 2016? Not a favorite memory. April of 2020, the price even dipped below $0 briefly. We survived, and we will get through this too.
There will be much speculation as to the cause of the decrease in oil prices: are they due to the tariffs or did they occur because of the OPEC decision to release an additional 137,000 barrels per day into the market? Or is it due to both (my guess is both had an impact).
Whatever the cause, we’ll be watching the trends because to balance the Alaska state budget, North Slope West Coast oil prices need to average $78 per barrel. As of this writing, the Department of Revenue hasn’t updated their ANS (Alaska North Slope) oil price since April 3. Since ANS West Coast price typically runs $5-6 more than West Texas Intermediate (WTI), we can guesstimate. WTI is posting at $59.38 at this moment, so ANS may be in the mid-$60’s range. Definitely not enough to balance the state budget.
A silver lining?
Maybe instead of the majorities only focused on chiseling down the PFD, implementing new taxes, and drawing from limited savings, our current world and state affairs will require us to think about cutting the budget. There certainly are opportunities for more efficiencies in our state agencies. We are not a lean mean machine.
Maybe the silver lining is interest in SB 107 will pick up. Maybe a sharp turn and rush downhill on this roller coaster ride will provide the perfect jolt we need to begin working toward a more efficient, accountable, and cost-effective state government.
