Revenue estimate expects rising oil
BISMARCK, N.D. (AP) — A new revenue forecast from North Dakota’s economic consultant is counting on oil prices to go up, just as Gov. Doug Burgum did in the two-year, $14.3 billion budget he proposed last month.
IHS Markit projects prices ranging from $50 to $70 a barrel, up from less than $49 Monday, in its report to the Legislature. The firm’s estimate of $2.9 billion in revenue from major tax collections was largely in line with the state’s own forecast, which Burgum relied on to write his budget.
Republican House Appropriations Chairman Jeff Delzer said volatile oil prices will force lawmakers to be cautious with priorities when they adopt a budgetary starting point this week.
“We need to be fairly conservative,” Delzer told reporters, after hearing a report from economist Jim Diffley of IHS Markit.
Lawmakers hired the Colorado-based firm in 2017 to give the Legislature a second opinion on state revenue forecasts that have missed the mark by hundreds of millions of dollars in recent years.
Oil prices are a key contributor to the wealth of North Dakota, the No. 2 oil producer behind Texas. State tax officials estimate every dollar that a barrel of oil either increases or decreases has a more than $33 million impact on the state treasury annually.
Diffley told Senate and House appropriations members that predicted prices range from $50 to $70 a barrel for West Texas Intermediate, the U.S. benchmark set at Cushing, Oklahoma.
WTI was fetching less than $49 a barrel on Monday.
Crude oil from North Dakota’s rich Bakken and Three Forks formations typically trades at significant discounts compared to WTI because of more distance and other difficulties in moving it to market.
Burgum, a Republican serving his first term, presented his proposed budget to the Legislature last month. The budget was based on a North Dakota discounted price of $46 to $50 a barrel. With the discount, North Dakota sweet crude was selling at an average price of about $41 on Monday, said Justin Kringstad, the director of the North Dakota Pipeline Authority.
Burgum based his budget on input from state budget analysts and the economic consultancy Moody’s Analytics.
The governor’s and the Legislature’s forecast both predict oil production to remain near the 1.39 million barrels daily set in October, the latest figures available.
GOP Sen. Ray Holmberg, chairman of the Senate Appropriations Committee, told lawmakers that it will be up to them to set a budgetary starting point sometime this week.
“The Legislature will decide how much money we think we’ll have,” Holmberg said. “We just have to come up with a number we have to agree on.”
The state’s current two-year budget including federal aid is $13.6 billion.