Oil prices place pressure on U.S. state budgets

Oil prices place pressure on U.S. state budgets

U.S. States, dependant on hydro-carbon resources are facing increasing budget pressure with shortfalls in revenues. Oil prices continue to fall and critics are unsure whether President-elect Trump’s proposed energy policies will be enough for the fossil fuel to bounce back in those oil dependent states.

Oil producers will have been buoyed by this week’s OPEC deal but with analysts at ratings agency Fitch forecasting only $65 a barrel by 2019, states must be feeling nervous at the promise of continued slow growth over the years to come. These commodities are essential to fiscal-growth and stagnant oil prices continue to hurt these states. 

With the drop in oil prices these energy rich states have seen their credit rating downgraded and so their cost of borrowing has increased. According to a Reuters article, falling prices in the oil and gas markets have “prompted Fitch in 2016 to downgrade Alaska to ‘AA+’ from ‘AAA’; Louisiana to ‘AA-‘ from ‘AA’; and West Virginia to ‘AA’ from ‘AA+’.” 

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