Despite a slight uptick since January, global oil prices are still half of what they were a year ago. These low prices have benefited consumers by dropping the price of gasoline and diesel across the United States. But, for oil-producing states, these lower oil prices mean decreasing tax revenues that will be difficult to offset through increased production alone.
According to John Krohn and Robert McManmon at the U.S. Energy Information Administration (EIA) the top five oil- and natural gas-producing states - Texas, North Dakota, California, Alaska, and Oklahoma - derive (unsurprisingly) a significant share of their unrestricted operating revenues from taxes on oil and natural gas production. While the sheer size of California's economy has made it relatively less affected by low oil prices, the other four top producers have not been so fortunate.
In particular, Alaska relies on revenue from crude oil production for 90% of its operating budget. In their 2015 revenue projections, the state assumed oil prices at $105 per barrel. Instead, the state is seeing $50-60 per barrel.
By the numbers - according to the EIA:
- Texas collected $583 million in tax receipts from oil and natural gas production in August 2014, but tax revenue declined by 40% to $352 million in January 2015, based on data from the state's comptroller.
- North Dakota' s tax revenue from oil and natural gas production decreased from $323 million in August 2014 to $254 million in January 2015, a 21% reduction.
- Alaska's monthly oil and gas production tax revenue in August 2014 was $108 million according to initial oil and natural gas production tax receipts received by the Alaska Tax Accounting System. In January 2015, revenue from these taxes was $26 million.
- Oklahoma collected $62 million in funds from production oil and natural gas taxes in August 2014. This value declined to $43 million in January 2015, a drop of roughly 30%, based on information from the Oklahoma Tax Commission.
Noted here in that Texas and North Dakota experienced these significant drops in tax revenue despite increases in crude oil production over the same period of time.
1. Chart of Marker Crude Oil Prices from the International Energy Agency.
2. Chart of monthly crude oil production in selected states and monthly tax revenue from crude oil and natural gas production in selected states by the U.S. Energy Information Administration.