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Sunday, July 22, 2018
HomeAlaska NewsWhere will oil prices land? No matter — Democrats will still want to raise taxes

Where will oil prices land? No matter — Democrats will still want to raise taxes

 

“Anyone who thinks oil is going above $70/barrel is in a fantasy world. Why are we mortgaging our future with current oil taxes?” Tom Begich, state senator from Left Anchorage asked the Twitter Universe last week.

Hawkins

Bank of America/Merrill Lynch, which we can assume are somewhat informed, sees crude jumping 46 percent by June, to $69 per barrel. Oil and gas investments are down $300 billion — about 40 percent — meaning supplies may decline, and demand is possibly on the upswing. That’s their logic.

Goldman Sachs has a more moderate outlook: It sees prices popping up to $57.50, and settling at $55 for the second half of this year.

The World Bank guesses $55.

One thing we know for sure: Oil price predictions are seldom accurate. When prices are high, forecasters convince themselves this time is different. This time they will stay high forever.

Conversely, when prices tank, prognosticators tend to believe that they will stay low.

It is not only oil, but the nature of all markets. Commodity markets, with their inherent volatility, are especially difficult to predict, which is the practical reality behind the old saying, “There has never been a commodity trader who has died rich.”

Veteran energy analysts know that oil prices move in long waves. It takes many years for high oil prices to produce the supply increases and demand reductions that ultimately bring them back to earth.  And once they do land with a thud, as they did in 2015, they seldom pop right back up.

How long are these waves? Historically, they have moved in 10-20 year cycles.

So Sen. Begich is probably right, to the degree that anyone knows. But he is right for the wrong reasons. In his mind, low oil prices are a reason to re-open the Alaska oil tax debate and sock it to producers who are already struggling to break even in our high-cost state.

And that brings to mind another old saying:  “Even a blind chipmunk stumbles across an acorn every so often.”

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

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