If oil production is declining already, how come Alaska has a budget surplus?
The amount of revenue the state receives from oil resources depends not just on the amount that is pumped through the Trans-Alaska Pipeline, but also on the price of that oil. In recent years, there have been dramatic increases in oil prices worldwide, resulting in several years of budget surplus for the state. However, even if oil prices stay high we will eventually feel effects of declining production. With fewer barrels being produced each year, the price per barrel would need to continually increase in order to bring in the same amount of money. Few experts predict these fiscal good times to last, which is why some policymakers favor increasing our savings rate now. The more money we can save and invest now, the more earnings we’ll have in the future to help shrink the expected fiscal gap.