Lower Oil Prices Start to Pinch Oklahoma State Revenues
The plunge in oil prices is starting to hurt Oklahoma's energy-related revenues and if the price remains low, could hit income and sales tax revenues if energy workers have less money to spend, the state's treasurer said on Friday.
The monthly numbers for November show the first year-on-year decline in energy tax revenues for the state in 19 months. Overall state revenues remained healthy, but the state treasurer expressed caution.
"We are beginning to see the signs of softening prices, but we've not yet seen the impact of these extremely low prices of below $70. That will take a few months to get in," Ken Miller, Oklahoma State Treasurer, told Reuters on the sidelines of the National Association of State Treasurers' conference.
Collections from its gross production tax on oil and natural gas slipped below prior year collections in November, down 5.3 percent year-on-year, the state treasurer's office said in a press release on Thursday. It was the first monthly year-on-year decrease since April 2013, the office said. Still, personal income and sales taxes were healthy, it said.
"Our concern is that if (oil prices) stay low is that we eventually see that spill over into our other revenue sources: personal income tax, consumption tax, motor vehicle taxes," said Miller. "We do have a large part of our economy that is tied directly or indirectly to energy."
Oil prices have fallen more than a third since June and price forecasts have collapsed since OPEC decided not to cut output.
Oklahoma headquarters a number of energy companies including Continental, Sandridge Energy and Chesapeake Energy.
In the state, energy companies continue to extract oil from traditional reserves. They also are tapping unconventional shale fields using the process known as "fracking." Moody's said in a research note in October that low prices risk decreasing the allure of tight oil deposits, which require more costly extraction.
Miller said Oklahoma does not rely heavily on extraction taxes, which make up about 5 or 6 percent of its general revenue fund.
"We will definitely feel the affect of lower prices. Fortunately for us its not a high percentage of our general revenue fund," he said.
Lower oil prices are expected to boost some states' sales revenues, as they give people more discretionary spending power. That is tempered by the impact lower prices have on energy-focused states, treasurers said on Thursday. (Reporting by Megan Davies; Editing by David Gregorio)