Even though it’s good for drivers across the nation, Louisiana could suffer from the sudden drop in oil prices.
The energy industry has always been central to Louisiana’s economy, but Light Louisiana Sweet crude oil has dropped in price along with the industry’s falling values. According to Mark Ballard for The Advocate, Light Louisiana Sweet’s value dropped almost 26 percent from $105/barrel to about $80/barrel, and it’s causing a pinch in the state’s budget.
Louisiana’s budget went into effect on July 1, and revenues collected from the energy industry were included in the spending plan. But now the revenues will be lower than anticipated, and Gov. Bobby Jindal and his administration must sort out a way to balance the budget by making cuts before the price-dip has too great an effect.
The Revenue Estimating Conference (REC), which convenes in order to reevaluate current tax, fee and royalty incomes for the state, is meeting weeks earlier than usual to assess the situation and set the necessary changes in motion. The four-member group would typically meet at the end of December or beginning of January.
The sooner the downward income trend is addressed, the less damaging it will be to the state’s budget. Cuts can be spread out over the long-term, rather than being deep sacrifices at the end of the fiscal year.
Mineral revenues account for about 13 percent of Louisiana’s budget at approximately $1.3 billion. Although there are no solid numbers at present, the REC suspects it will have to reduce the state’s budget for the remainder of the fiscal year. Reduced expenditures could result in budget cuts for programs across the board.