Higher taxes, like those under debate in Alaska, would only add to the challenges the industry faces.
COMMENTARY / Dr. MARGARET THORNING
ALASKA JOURNAL OF COMMERCE
This summer, observers across the nation watched as lawmakers in the state of Alaska pulled together a buzzer-beating compromise that prevented a potentially catastrophic budget shutdown and kept the government funded through the coming fiscal year.
For countless Alaskans who simply wanted their government to continue to operate, the compromise is a win. The alternative — an unprecedented shutdown — would have been untenable, resulting in significant upheaval for Alaskans seeking to utilize programs ranging from fishery permitting to cruise ship oversight to early education and Head Start services.
For political and policy junkies, it was a budget showdown that checked nearly every box, complete with flaring tempers, bruised egos, high stakes, and the discussion of policy shifts that could send ripples through the economic landscape for years to come.
This is particularly true in the case of the oil and gas industry, a sector that is looking at increased taxes in the eye in Alaska while simultaneously facing extremely challenging market conditions across the nation and around the world.
On the heels of a massive surge in domestic production driven by advances in extraction technology and finds from the Bakken to the Marcellus, fortunes have changed somewhat for the American oil and gas sector.
Prices have fallen steadily in recent years, hovering around $47 per barrel, and analysts expect the price to remain in the $40 to $60 range for the next five years. The cost of producing a barrel of oil is also increasing alongside advances in extraction technology, with companies pursuing projects that are riskier, more difficult to access, and ultimately more expensive.
The oil and gas industry is strong, and no one will mistake it for a struggling mom-and-pop operation. But these are no longer the boom times of the early 2010s – margins are thinner, profits are lower, and the challenges on the horizon are greater than they have been in some time.