Saturday, December 13, 2014


Bobby Jindal is already leaving us with a $1 billion hole in next year's state budget.  Expect that will only get worse.
Of more immediate concern is the impact of the price of oil on the remaining months of this year’s budget.

“Oil prices have hit a five-year low over the last week, and they’re trending downward,” Nichols said. “We’re anticipating that the oil prices likely will get dropped again, likely in January.”
They're expecting it to stay low for a while.
Surging U.S. light tight oil supply will push total non-OPEC production to record growth of 1.9 million bpd this year although the pace of growth is expected to slow to 1.3 million in 2015, the IEA said.

Given lower estimates of global demand growth, the IEA said it had revised its predictions for demand for oil from OPEC for 2015 down by 300,000 bpd to 28.9 million bpd. That is more than 1 million bpd below the cartel's current production.

Demand for OPEC oil will bottom out seasonally in the first quarter of 2015, leading to a large build-up in stocks.

The IEA said based on current projections of still relatively weak demand growth and robust supply, global oil inventories would build by close to 300 million barrels in the first half of 2015 in the absence of disruption, shut-ins or a cut in OPEC production.

And here, to finish out that Advocate article, is why it matters to us. 
The price originally used to calculate the revenues for this fiscal year was $95.80 per barrel. (In July, when this year’s budget went into effect, the price was about $105.)

In mid-November, legislators reduced the estimate to an annual average of $81.33. The price of crude has continued to fall and has been hovering around $60 per barrel for the past week.

The price of oil is used to calculate severance and other taxes as well as royalties that state government collects. The general rule of thumb is about $12 million less available to state government for every $1 drop in the average annual price of oil.

In November, the Revenue Estimating Conference determined that the state would collect $171 million less than the originally anticipated $10.6 billion in collections from taxes, fees, royalties and other revenue sources. That’s a drop of about 1.9 percent for the remaining months of fiscal year 2015, which ends on June 30.

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