As the Alaska Legislature approaches the final stretch of budget negotiations, global oil market dynamics cast a long shadow over fiscal deliberations. With just four days remaining in the session, the latest report from the International Energy Agency offers a mixed outlook for Alaska’s state budget.
The price of Alaska North Slope crude oil has dropped from approximately $89 per barrel in April, 2024 to under $68 per barrel by April of this year. The $21 per barrel decrease is a 24% drop.
According to the IEA’s May 2025 report, global oil demand growth is expected to slow even more in the months ahead. After rising by 990,000 barrels per day in the first quarter of 2025, demand is forecast to increase by just 650,000 barrels per day for the remainder of the year.
The moderation is attributed to a combination of macroeconomic headwinds and record electric vehicle sales that cut into traditional fuel use, according to the IEA. Demand growth is projected to average 740,000 barrels per day in 2025 and 760,000 in 2026.
The flattening of demand comes at a time when global supply is set to expand.
World oil supply is forecast to rise by 1.6 million barrels per day, reaching 104.6 million barrels per day in 2025, and by an additional 970,000 barrels per day in 2026. Non-OPEC+ producers are expected to account for most of this increase, even as US. light tight oil production slows amid capital expenditure cutbacks by independent producers. The IEA has downgraded US LTO growth by 40,000 barrels per day for 2025 and 190,000 per day for 2026, due to reduced drilling activity.
OPEC+ has also surprised markets by moving up production increases that were originally scheduled for later. The bloc announced a second consecutive monthly output hike in early May, adding 411,000 for June. Despite some overproduction by member countries, the oil bloc is on track to contribute 310,000 in additional supply this year and another 150,000 in 2026.
The supply-demand imbalance is creating volatility in oil prices. Benchmark Brent crude fell by $14 per barrel in April to a four-year low of just above $60 before rebounding slightly to around $66 by mid-May. Trade tensions between the United States and China initially dragged prices down, although temporary trade agreements have since stabilized the market.
These trends have implications for budget negotiators in Juneau, where petroleum revenues remain a cornerstone of the state budget.
Alaska’s oil royalties are estimated at $800 million to $1 billion for FY 2025, accounting for about 11% to 14% of the Undesignated General Fund budget. With production taxes, property taxes and corporate income taxes, oil contributes about $2.38-$3 billion dollars per year to the Alaska state operating budget, (about 33-44% of last year’s UGF budget).
The price of Alaska North Slope oil is now $67.78 and not expected to rise.
The conference committee on HB 53 (operating budget) and HB 55 (mental health budget) meet on Sunday at 1 pm in the Capitol to negotiate the final package that will be sent to Gov. Mike Dunleavy.
The budget passed by the House included:
- $6.167 billion in Unrestricted General Funds, while last year’s budget had $5.0 billion in UGF spending
- $1.004 billion in Designated General Funds
- $1.976 billion from other state funds
- $3.832 billion in federal receipts
- Total: $12.979 billion
On May 8, the Alaska Senate passed an operating budget of approximately $6.25 billion. The conference committee is in charge of negotiating the differences between the budgets from the House and Senate.
Watch Friday’s conference committee negotiations at this Gavel Alaska link. Today’s conference committee video can also be watched at Gavel Alaska.
A 24% drop in oil prices has somehow triggered a recent ~10% increase in the price of gasoline and diesel in Soldotna. Go figure.
That would be the upcoming “tourist seasonal spike effect”
Why are we wasting money on educating the Legislature on projected oil revenues when it just goes in one ear and out the other, as evidenced by their recent increase in funding to the public education rathole, despite declining revenues!
Why not cut to the chase?
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We have no way to know the truth of these numbers, no DOGE audit backs’em up, special interests outnumber legislators 7 to 1 and none represent us, plus we’re bloody well numb to gloom and doom dripping out of Juneau whenever “budget” is mentioned.
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But aren’t we blessed to have a Ruling Class who also know what the Magic Number is?
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That’s the price of oil at which state and city governments just can’t tax productive citizens enough to stay in business, and taxpayers start packing for another 80’s-style exodus.
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If “global oil market dynamics” just now got their expert attention, does that mean the Magic Number’s a lot closer than they, or we, thought?
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$12.979 billion, but not one damned word about asking Elon Musk’s people to do a DOGE audit …like where’s the money coming from, where’s it going, why so much? Throw in a few holy words nobody understands, say it’s for the kids, and stuff’s okay for another year?
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Ironic isn’t it, State’s circling the drain but, amazingly, Alaska Native Corporations seem to be doing just fine, making truckloads of money worldwide, seemingly unburdened by Magic Numbers, parasitic organisms like the education industry or public-employee unions while, would you believe it …actually paying dividends to shareholders?
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Difference in management styles, difference in personal characters, maybe?
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People figure out how to regain control of their grand-jury and election systems, get this money-laundering, power brokering, and general corruption out in the open and properly prosecuted; they’ll do it someday, it’s just the way things work …that’ll be some “long shadows” for Alaska’s political dynasty, no?
Morrigan, Thank you for the enlightenment above.
It is obvious that a parasitic organism is in control of State spending, making sure that the parasites get properly fed.
I wonder when the people of Alaska will at long last wise up and be set free from this encantation?
I’m not hopeful. It turns out the parasites mentioned above are in control of vast sums of election campaign ca$h, the election process and certainly the courts.
What Alaska needs is large infusions of outside money, directed towards developing its natural resources. This will result in projects erecting new infrastructure which will create new high paying non governmental jobs. Simply put, someone with a good private industry job,” don’t need no stinking parasitic welfare plantation hand out”.
Alaska hasn’t built a new highway since 1976, and yet we’ve channeled billions into the Welfare Plantation. Huh?
Ask Qatar to instead of “Donating a $400 million dollar Jet” to Trump, to donate to Alaska. Isn’t it interesting under Biden there was more production of oil? Drill baby Drill.
Be aware like in 2020 when oil prices were low Trump met with Saudi Arabia and Russia to cut production which resulted in increase in gas prices at the pump.
Additionally, Trump said grocery prices declined and eggs are down, probably because he never been to a grocery store in his life.
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