OKLAHOMA CITY (KFOR) – A perfect storm internationally is making for a dramatic drop in oil prices.
“I’m very happy with the gas prices, especially if they are going down, that really makes me happy,” said OKC motorist, Tania.
As drivers are basking in the glory of gas below a $1.80 a gallon, economists see dark clouds on the horizon for Oklahoma.
“It’s a confluence of a couple of bad things happening all together,” Oklahoma City University economics professor John Willner said.
Willner says the slowing global economy coupled with decreased travel internationally, thanks to the coronavirus, would be bad enough. Now, tack on a fall out between Russia and Saudi Arabia on setting worldwide oil prices and production.
He says this will hurt Oklahoma oil companies.
“They are going to really, really reduce their activity across the board,” Willner told News 4.
Willner says it currently costs more to produce a barrel of oil in the US than it sells for. That means less exploration and possible pipeline construction halts.
“Cheasepeake and Devon, who were not in really good health anyway and they really needed a high price, they are going to be experiencing greater difficulty,” continued Willner.
Willner says Oklahoma’s economy is far more dependent on oil and gas than it was even 15 years ago.
“If it is sustained for a long period of time, it could be very, very devastating for the overall economy,” said Willner.
“The situation is severe and we are watching it very closely,” said Rep. Jon Echols, of Oklahoma City.
State lawmakers are taking heed of the price dip. Currently, the price of oil is about $32 per barrel.
The state has set its current budget for oil prices just shy of $54 a barrel. That’s a 41% difference.
That gap could mean a huge budget deficit in the near future.
“What I would tell citizens right now to make them feel good, when we went through the last budget shrinking, we had around $600 million in savings. Right now, Oklahoma is sitting at $1.2 billion in savings,” said Echols.
Echols says those savings are thanks in part to the efforts Gov. Kevin Stitt and the Legislature made to put away money in the Rainy Day Fund in 2019.
Gov. Stitt issued a statement saying:
“Oklahoma, we are in this together. Thanks to Oklahoma having its largest savings account in our State history, we are going to remain strong. We are going to push for economic growth. We are going to continue to prioritize long term fiscal stability, and we are going to protect core services.”
The governor also issued a video statement.