That's a threat to Louisiana's newfound wealth, which is bolstered largely by oil prices that topped $70 last year. Albrecht says the state is following the situation closely. "It's all speculation, but we all do it, and that's how oil prices work. It's cyclical," he says. "We have accounted for prices being below $50 for the second half of the fiscal year [Jan. 1. through June 31]. When we made that forecast back in December, everyone thought we were being too conservative. Some people thought I was being goofy."
The state currently has $1.3 billion in the bank, a staggering figure. "We've never seen that much in there," says Deputy Treasurer Jason Redmond. But it's only because the Legislature opted out of cashing in during a December special session, when there weren't enough votes to lift a constitutional spending cap. When lawmakers return for a regular session in April, the money will be back up for grabs, especially with elections looming ' as long as crude oil prices don't rain on the parade.
If prices drop below the $50 mark, Albrecht says the state's financial forecast will have to be re-drafted by the Revenue Estimating Conference in May. And for every $1 of annualized barrel price the state has to deduct from its forecast, it will lose upward to $13 million, he says. That means lawmakers may have to be more conservative than usual in how they spend the state's money this spring. In Louisiana, where oil is king, anything in the $30 or $40 range would be significant. "At this point, I don't feel it's unreasonable. I wouldn't say it's completely crazy with the way oil prices work," says Albrecht, adding his five-year forecast has oil prices sticking in the $40 area through most of 2010.
Crude oil prices fell below $50 a barrel during the second week of January, its lowest level since May 2005. The drop followed news of a significant rise in crude stockpiles.
The dip was limited, however, by cold weather in the northern United States, a continuing factor that could play out several different ways. International politics intercede as well ' if China and India enter a recession or anything close to it, demand would be reduced along with crude oil prices.
The weather, in concert with the aftereffects of the 2005 hurricane season, has placed power in the hands of buyers. In response, sellers are lobbying the Organization of Petroleum Exporting Countries to cut production in an effort to pick up prices, but the group's major producers aren't budging.
Don Briggs, president of the Louisiana Oil and Gas Association, believes some economists may be crying wolf. Consumers are enjoying lower prices at the pump, at least for now, and few expected oil prices would exceed the $77-per-barrel peak enjoyed in July. Natural gas prices are still holding strong, he adds, and it's too early to fear an impact on exploration or tax revenues. "It's just not a real concern, yet," Briggs says. "If we get down to $40, that would be horrible, but we'll handle it. We're an industry that responds to oil prices. And I don't think OPEC would let it get any lower than that."
Dan S. BornÃ©, president of the Louisiana Chemical Association, says his membership only uses an insignificant amount of oil in their operations and devotes more attention to natural gas prices. Additionally, refineries are expected to lift their operations to the highest level in two years during 2007. "From the chemical point of view, lower energy prices always equate to lower raw material costs," he says. "So as a general observation, this could be favorable for us as long as it doesn't impact natural gas prices."
Despite the positive spin, Albrecht and others warn that $30 or $40 crude oil prices could very well be on the way. But for now, it's all a waiting game as the prices unfold in real time over the Internet and airwaves. "We'll be tracking this monthly from the state's point of view," Albrecht says, "but I'm watching it daily from my office. It drives me crazy sometimes."
Even if Albrecht catches a potential falling wave of prices and revises his official state forecast, one question remains: Will lawmakers heed warnings for a more conservative approach?
Lafayette Police have had a busy day.
Gov. Bobby Jindal's administration will use $130 million in patchwork financing from a tax amnesty program, insurance settlement, uninsured motorist penalties and other excess funds to close most of the state's midyear budget deficit.
Democratic U.S. Sen. Mary Landrieu said she disagrees with President Barack Obama's actions on immigration, hoping the latest controversy doesn't worsen her campaign difficulties.
Gay-rights advocates challenging Louisiana's same-sex marriage ban announced Thursday that they have asked the U.S. Supreme Court to review their case before it is heard by a federal appeals court.
Thinking himself the “son of God,” the man charged with the 2013 killing of an officer of the Chitimacha Tribal Police will not stand trial following a ruling Thursday on his mental competency.
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Friday's Blogs from the Bog!
Ten departing CEOs rake in $430 million; profile of FSU gunman emerges; Buffalo's weather woes and more national and international news for Friday, November 21, 2014.
The Ethics Board gives the lame duck Youngsville mayor permission to offer a sweet parting gift to the community he’s presided over for three terms.
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A legend in the Acadiana Oil Patch, Comeaux died Monday, Nov. 17.
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Early voting for the runoff is shortened by two days because of the Thanksgiving holiday.
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Former Le Rosier chef who cooked at the James Beard House and was named one of the “Best New Chefs in America” by Food & Wine magazine in 1995 was 48.
Pat Cooper is contesting his termination by the LPSB, filing a petition Tuesday that calls the recent decision “arbitrary and capricious.”
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The administration says public college campuses won't be on the chopping block.
The legendary musician is performing at a $1,000-per-person fundraiser Dec. 1 in New Orleans.
Old savings and checking accounts, payroll checks, stocks and dividends, insurance proceeds, oil and gas royalty payments and other unclaimed money is sent to the state when a business cannot locate someone.