Fears over the coronavirus have led to a global oil price war that could have a serious impact on Oklahoma.
The state budget, services, and thousands of state jobs rely on tax revenue from oil. And when oil prices drop too much, the state is in big trouble.
And that’s exactly what is happening now. A decrease in demand for oil because of the coronavirus led the Organization of the Petroleum Exporting Countries (OPEC) nations to ask participants to collectively reduce production by a million barrels a day. Russia was asked to cut production by 500,000 barrels a day. That would boost the cost of oil globally. But the Russians refused, so OPEC nations slashed export prices.
That dropped the price per barrel down to about $35 a barrel. The state’s budget is based on oil taxed at around $54 a barrel.
“It’s very concerning. First off we’re trying to figure out how long term is this change” said Senator Greg Treat (R) President Pro Tempore.
The state has about a billion dollars in reserves. The price war won’t have an impact on the current fiscal year, state leaders said. But if it drags on, it could have an impact on next year’s budget.
“We’re not to the point of looking at cuts right now,” Treat said. “We’ve made some very strategic and important investments in education over the last couple of years. Those are secure.”
Democratic Leader, Representative Emily Virgin (D) Norman said the state has to reconsider how it taxes.
“With a lot of wealthy Oklahomans only paying the same as the janitor who cleans their office, we don’t have a way to insulate ourselves from these cuts, so we have to take a broader look at our tax code,” said Virgin.
Oklahoma State Treasurer Randy McDaniel said there is reason to be concerned, but “lets don’t make hasty decisions on a one-day activity. Let’s see if agreements can be made between Russia and Saudi Arabia. There’s a lot of activities and factors that go into it so we have to monitor it closely, but we need to take a long term approach and not make sudden decisions based on one day’s activity.”