- Associated Press - Saturday, December 26, 2015

OKLAHOMA CITY (AP) - A $900 million hole in next year’s Oklahoma state budget and a projected shortfall for the last six months of the current fiscal year could deepen if the price of oil and natural gas stays at low levels not seen for more than a decade.

The price of oil has hovered around $35 per barrel for nearly two weeks; forecasters predict an average price of $42.83 through June 30. The projected price of oil for the fiscal year that begins July 1 is $53.57 a barrel, according to the Oklahoma Tax Commission.

But if oil falls short of the estimates, Oklahoma’s coffers will follow the downward trend.

Secretary of Finance Preston Doerflinger, Gov. Mary Fallin’s chief budget negotiator, said he thinks the prices will improve.

“Are we going to see $110-a-barrel oil? No, and we’re not projecting that,” he said. “Do I think $54 is a reasonable projection? Yes.”

Still, some economists say a more conservative price estimate for both oil and natural gas may be in order. Natural gas prices have sunk to 16-year lows in recent weeks and were below $2 per 1,000 cubic feet for nearly two weeks. The projected average price for the remainder of the current fiscal year is $2.37, while the average price for the next is $2.58 per 1,000 cubic feet.

The $53.57-a-barrel projection is a “little optimistic,” said Steven Agee, an economist and dean of the Meinders School of Business at Oklahoma City University.

“To predict oil prices a year out or a year and a half out is extraordinarily difficult,” Agee said. “Having said that, my estimates show that oil prices in the first half of 2016, before the Fiscal Year 2017 begins, are going to continue to be depressed.

“I think by Fiscal Year 2017 things will start to improve a little bit, but not to that extent. That’s my guess, and it is just a guess.”

The Tax Commission based its estimates for oil prices on a December 2015 report on oil baseline production by global forecasting company IHS Global Insight, according to Mark Hendrix, a policy analyst for the commission. The projections could be revised when the Board of Equalization meets in February to approve a final certification for how much money will be available for the Legislature to spend.

Mickey Hepner, an economist and dean of the College of Business at the University of Central Oklahoma, said he believes the budget situation will be even worse in February.

“Plus, it wouldn’t be surprising if next year, during Fiscal Year 2017, there has to be a mid-year budget cut because the projections would be so positive compared to what the actual revenues coming in will be,” he said.

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Follow Sean Murphy on Twitter at www.twitter.com/apseanmurphy


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