Friday, August 21, 2009


There was an article in the Times this morning that will bring a collective groan to the Governor and Legislators. Natural gas prices are at a seven year low. Right now it is $3 mcf(thousand cubic feet), last summer it was $13. I wonder if this new number has been factored in to the deficit we are now facing. I understand the new estimates this week had pegged revenues based on $4.30mcf. For every ten cents that the price falls, the state loses another $12 million. Ouch.

No doubt, as a recovery appears those prices will shoot sky high again, but in the meantime the next couple of years look bleak for the gravy train of natural resource revenues. Don't feel sorry for the oil and gas boys though. Their untaxed outrageous record profits over the last decade should carry them for a while. And guess what? These guys are now going to the federal government for help. They want the Fed to force coal burning power plants to switch to natural gas. I would actually favor that! It might give us just a little more time on the climate change crisis.

1 comment:

Rodney said...

Does all of this mean we'll be paying less to heat our homes this winter? I'm guessing not.

You certainly know more than most regarding the taxes paid by the extractive industries - severance tax? - for the resources they "mine" and then resell, but it seems the tax rate maybe shouldn't be dependant on the wholesale price of the resource. It would generally be considered that the lower the price of oil/gas etc. to the consumer the better things are, except for the loss of tax revenue. Especially in light of the fact that retailers are going to maintain their profit margins no matter what.