With crude oil and natural gas prices likely to remain soft, US energy states' weakened revenue prospects are likely to persist well into next year, according to Fitch Ratings in a new report.
With crude oil prices languishing in the $40-50 range for months now, losses in related revenue sources that underpin energy states' budgets are on the rise.
“Stagnant commodity price trends are dampening energy states' economic growth and are eating into economically sensitive revenue sources such as sales and personal income taxes,” said Senior Director Marcy Block.
As to which states will be most adversely affected, the impact will vary considerably. States with more diverse economies and revenue resources should be able to weather prolonged commodity price declines more effectively than those states that rely more heavily on commodity production. This means that states like Alaska, North Dakota, and Wyoming are more directly in the crosshairs of this trend.
That said, states as a whole have long had the financial flexibility to adjust to these commodity market vulnerabilities.
Block added, “Should the prolonged slump in commodity markets extend into fiscal 2017, we would expect states to identify fiscally prudent strategies to address vulnerable state revenue sources.”