Revised revenue forecast: $91/barrel oil, $545M extra for state for rest of fiscal year due to Iran war

New current-year oil price forecast of $75.26 far exceeds December’s $65.48 prediction; outlook for fiscal year starting July 1 is $75 a barrel, up from $62 in December

A customer stops to fuel a vehicle at Deharts Auke Bay Store on Friday, March 13, 2026. Juneau’s average gas price for regular unleaded has risen about 16 cents a gallon during the past month and 28 cents during the past year, according to AAA. (Laurie Craig / Juneau Independent)

By Mark Sabbatini

Juneau Independent

This is a developing story.

An average oil price of $91.09 per barrel between now and June 30 is expected to result in $545 million of extra revenue for Alaska’s state government, according to a forecast released Friday by the state Department of Revenue.

The forecast assumes a major increase in oil prices due to the two-week-old war against Iran will continue for months, but won’t extend throughout the coming fiscal year that begins July 1. Next year’s prices are expected to average $75 a barrel, "which assumes that prices will begin FY 2027 over $80.00 per barrel and decline throughout the fiscal year."

"As always, it is important to note this forecast represents one scenario within a range of potential outcomes," Janelle Earls, the revenue department’s acting commissioner, wrote in a cover letter for the forecast. "This is true now more than ever given current world events."

State legislative leaders, in their initial assessments of the revised forecast, said a foremost priority is asking about the specific parameters resulting in the rosier outlook during hearings with revenue department officials early next week.

"What we’re told at this preliminary stage is they changed their sensitivity tables," said Rep. Andy Josephson, an Anchorage Democrat who co-chairs the House Finance Committee. "And so we’re going to want to look at that, educate ourselves on that, and be ready for questions on Monday with (the Office of Management and Budget) and the Department of Revenue."

The department’s sensitivity analysis — evaluating how various "what-if" scenarios might affect oil prices — occurred under drastically different circumstances than usual, according to Friday’s report.

"As of early March 2026, oil markets are currently experiencing a period of historically high uncertainty and volatility, driven by the unfolding conflict with Iran and related impacts to expectations around oil supply, demand, and transportation," the report states. "The first two weeks of March saw major increases and decreases to oil prices and one of the highest levels of price volatility on record. This represents a potentially historic moment, and a uniquely difficult one for forecasting oil prices."

National and global predictions for how long the war might last and how it will affect oil prices span a vast range. But Rep. Will Stapp, a Fairbanks Republican on the House Finance Committee, said Friday the immense damage to oil facilities and disruption to shipping in the Middle East means oil prices aren’t likely to return to normal immediately after the war.

"If the war ends tomorrow I'm pretty sure they can't rebuild a refinery in a day," he said.

The updated state forecast is a major financial swing from the gloomy outlook offered by the department in December.

The December forecast called for oil prices during the current fiscal year to average $65.48, which was below the $68 average predicted a year ago. The forecast issued Friday predicts an average price of $75, based on $67.34 during the first eight months of the fiscal year and $91.09 the final four months.

Next year’s average was $62 in the December forecast and the new $75 prediction means the department is also forecasting an additional $510 million in revenue.

The forecast is likely to resolve many, but not all, budget struggles currently facing state lawmakers.

A supplemental budget for the current year of $373.5 million was put on hold Thursday due to questions from Republicans in the House minority caucus about whether oil prices might rise enough to fully fund it rather than tapping into a reserve fund. The projected revenue for the next four months will cover that amount — plus more than $100 million in items trimmed from the budget in an attempt to secure enough votes to tap reserve funds on the assumption they would be needed.

Also, the extra revenue forecast next year would likely allow funding a status quo budget, including a $1,000 Permanent Fund Dividend, without accessing reserves. The current year’s budget was passed on the assumption it would balance if oil prices averaged $64 a barrel.

"Because of the revenue projections it's going to be easier to be operating budget chair than it was going to be 24 hours ago," Josephson said. "Because now we have some opportunities to look at maybe a larger capital budget, more education funding, maybe a larger dividend, maybe more operation adds."

That may also work to the disadvantage of the minority caucus, despite its win on stalling the supplemental budget. Because it takes a three-fourths vote in both the House and Senate to access the Constitutional Budget Reserve, most years it’s been necessary to make concessions to the minority caucuses because withdrawals from the reserve have occurred. That may no longer be necessary for the coming year.

House Minority Leader DeLena Johnson, R-Anchorage, said during a press gaggle Friday afternoon she believes her caucus still has plenty of leverage during the remaining two months of the session.

"First of all we don't just operate on leverage," she said. "Believe it or otherwise, we try to have good governance, good policies. But there are things that they're not going to be able to just get rid of the minority right away, like ‘OK, see you later.’ Even if it's just an appetite for spending that's expanded — because that's what happens when you have more revenue comes in — we'll be there at the end helping make decisions on whether those are things that need to stay in."

Johnson said if spending is added to the budget, a larger PFD should be a foremost priority since residents are telling her they are struggling with food and other costs.

While state policymakers might see the skyrocketing oil prices due to the war as a boon — in the financial sense, at least — what is being called "the largest oil supply disruption in history" is wreaking havoc in many other ways including gas prices.

Juneau’s average gas price for a gallon of regular unleaded has risen about 16 cents a gallon during the past month and 28 cents during the past year, according to AAA. The increase is higher nationwide, with the average of about $3.60 per gallon Thursday up from $2.94 a month ago.

• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.