State tax revenue squeezed by oil prices

WASHINGTON, Jan. 13 (UPI) -- Lower crude oil prices are starting to drain on tax revenues for some of the top producers in the country, a federal data review found.

State reports on the direct impacts of lower crude oil prices are mixed, though some of the top shale oil and gas producers have touted positive momentum from diversified economies.

The U.S. Energy Information Administration in a review of state data show for Texas, the nation's top oil producer, tax revenues from energy are down about 50 percent year-on-year. The report found that, despite negative pressure from revenues, the state's economy is more diversified than other oil producers.

"Texas can likely respond to the lower severance tax receipts without drastic changes to its enacted 2016 budget," the EIA's brief said.

Outside of oil and natural gas, Texas produces more than 11 percent of all the manufactured goods in the country, putting it in the No. 2 spot behind California in terms of factory output.

North Dakota is the No. 2 oil producer in the nation behind Texas and, even though its production volumes were relatively stable in 2015, tax revenues dropped 43 percent to $2 billion as a result of lower crude oil prices. For the first five months of the 2015-2017 budget, revenues were off nearly 9 percent below the state's forecast.

"If projected revenue remains 97.5 percent or less of the budgeted amount, across-the-board spending reductions would be imposed for most state agencies," EIA cautioned.

In Alaska, once one of the primary producers, EIA data found tax revenue has "fallen further and faster than other state" in part because tax policies emphasize the income from energy companies rather than the amount of oil extracted. Few energy companies have reported net profits during the market downturn. Last year, EIA said Alaska received "practically no revenue" from the sector.

Most market analysts expect a recovery in oil prices during the latter half of 2016, though crude oil prices will remain below peak 2014 levels long term.