Has the Walker Administration cooked the Spring RSB to show a worse than likely outlook? Maybe so. We have wondered where the oil prices used in the Spring Forecast came from (which, by FY 2020 are down 23%, and by FY 2025, 24.5% from those projected just 4 months ago in the Fall RSB). The RSB didn't explain it, but this story does. "Long term, the Revenue Department expects oil to stabilize in the $60 per barrel range by 2021, which Hoffbeck said partially reflects the historical inflation-adjusted average price as well as the range where shale oil, which can be brought into production quickly, becomes profitable. It makes sense that $60 would be kind of a ceiling we would bump into on oil price,' he said." Uhhh, given the drop in global investment levels shale production won't be the marginal source of supply even by the end of the decade, much less beyond it (and thus, won't form the price cap). Instead, as the IEA has said other, more conventional projects will form the marginal cost of supply at that point, on which they have based their 2020 $80 base case. Because price affects investment and, thus, production levels, the Administration's reduced price also likely leads to lower than reasonable production forecasts. This issue is hard enough without the Administration (or the #AKLeg, which has done a little cooking of its own in its proposed budgets) rigging numbers to fit their narrative. I understand the Administration wants to sell its position, but one would have hoped at least they would play the numbers straight. It appears they haven't even done that. http://ow.ly/ZYfeS
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