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U.S. states rich in oil see greatest revenue volatility

WASHINGTON, Jan 8 – The treasuries of U.S. states with large energy sectors are swinging wildly from full to empty as oil prices take unexpected turns, a new report released on Thursday by the Pew Charitable Trusts shows.

States that rely the most on severance taxes have the highest revenue volatility, led by Alaska, where oil extraction levies provided 78.3 percent of tax revenue in 2013. According to Pew, the state has a volatility score of 34.4 percent, meaning its revenue typically fluctuates within 34.4 percent above or below its overall growth trend.

Wyoming comes in second, with a score of 12.1 percent. North Dakota follows, alongside Vermont, at 11.6 percent. In 2013 severance taxes made up 39.7 percent of Wyoming’s revenue and 46.4 percent of North Dakota’s, Pew said.

Related: Rig count trends among major U.S. shale plays.

For all 50 states, the volatility score is a much lower 5 percent.

High volatility can make it difficult for states to budget from year to year, and unexpected plunges in revenue often force them to drastically cut spending. All states except Vermont must end their fiscal years with balanced budgets, and during the 2007-09 recession many had to call emergency sessions to slash funding for public programs when revenue plummeted.

In recent months oil prices have slid on a supply glut and shaken up the United States, where production has nearly doubled in the past six years. Major oil suppliers such as Saudi Arabia are showing no signs of cutting output in the near future. (Reporting by Lisa Lambert; Editing by Richard Chang)

This article was from Reuters and was legally licensed through the NewsCred publisher network.

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