Wednesday, June 13, 2012

Alaska's Break Even Oil Price? It depends ...

Earlier this week ANS oil dropped below $100/barrel and has remained there consistently since.  Given developments generally with respect to oil prices, it is likely that the price will continue to drift lower in the days, weeks and months ahead.  With these developments, some have started talking about what the break even price is this year for the state government budget, with most suggesting the price is $100/barrel.  That is true to a degree, but assumes that none of the following savings accounts included in the budget are funded during the year:   Public Education Future Year Funding, Regional Educational Attendance Area School Fund, Renewable Energy Grant Fund, Education Grants/Performance Scholarships Fund, Mariculture/Charter Fisheries/CQE RLFs, AIDEA Sustainable Energy Development Fund, and neither contribution to the Statutory Budget Reserve.  The break even price to fully fund the budget is $110/barrel.  The break even price to fund all of the savings accounts -- including the recently highly touted AIDEA Sustainable Energy Development Fund -- other than the second contribution to the Statutory Budget Reserve, is $104/barrel.