The U.S.-Israeli war against Iran has left oil markets more uncertain than they were during the Great Recession, a state expert told the Alaska Legislature.
In a pair of hearings on March 16, Alaska Department of Revenue economist Dan Stickel told state legislators that the volatility of global oil markets is the second-highest on record, leaving future forecasts particularly unreliable.
“The level of uncertainty around future prices in the oil markets now is higher than during the peaks of the Great Recession in 2008-2009 and it’s higher than the Russian invasion of Ukraine (2022), and it’s higher than any of the COVID spikes other than the initial April 2020 spike,” he said during a hearing of the Senate Finance Committee.
“The message here is to plan for the possibility that revenue doesn’t come in exactly at what we forecast for the next couple of years,” Stickel said.
Oil is the second-largest source of general-purpose revenue for the Alaska state budget, and Stickel’s testimony came days after the department released a new Alaska revenue forecast showing $545 million more in current-year revenue than projected in the fall. Most of that higher prediction is due to the price of oil.
Later in the afternoon, after testifying at the Senate committee, Stickel testified in front of the House Finance Committee.
He told lawmakers that “the level of certainty that we will hit our exact forecast is low.”
At the latest forecast prices, said Rep. Calvin Schrage, an Anchorage independent, a $2 change in the average price of a barrel of North Slope oil for a full year is worth $30 million.
He asked Stickel what the odds were that the forecast misses low by more than $2.
“Roughly a slightly less than 50% chance that we come in more than $2 below the forecast,” Stickel said, then alluded to the fact that there’s a similar chance of coming in above the forecast.
“The level of certainty that we will hit our exact forecast is low in either direction,” he said.
After starting the year around $65 a barrel, Alaska North Slope crude moved past $105 last week as the U.S.-Israeli war against Iran, and Iran’s efforts to deter oil exports from the Middle East, have created shortages and supply fears, causing prices to escalate.
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