Oil-Rich States Less Flush These Days; Some May Need to Tighten Budget Spending

AASHTO Journal, 19 December 2014

A number of states that have benefited from oil production when prices were higher now face slowdowns in their economic activity and could soon be tightening their budget spending, Reuters reports.

Among them, according to a Wells Fargo Securities analyst, are Texas, Oklahoma, Alaska and North Dakota – states with established oil fields and with new output in recent years from fracking – plus New Mexico, which was the top seller of oil from federal lands in 2013.

Reuters also cited a recent Fitch Ratings report that warned Alaska’s 2015 budget revenue forecast will have to be lowered by almost $2 billion because of the sharp drop crude prices, leaving the state with a budget gap of almost $3.4 billion.

Fitch separately warned Dec. 15 that “budgets for all the major oil-producing states could become less predictable in the near term if volatility in the oil markets continues.” It specifically listed Alaska, Louisiana, New Mexico and North Dakota among states that “will see declines in oil-related revenues with the steep reduction in oil prices.”

The ripple effects include declines in the housing market for states where energy activity has slowed, and Reuters story said another recent report found that consumer sentiment about the economy has weakened the region that includes the oil states of Texas, Louisiana, Oklahoma and Arkansas.

Fuel Fix reported that as many as 550 drilling rigs could go idle in coming months in shale fields due to the price plunge, or more than a quarter of active U.S. rigs.

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