Optimism over the state of Alaska's finances is hard to come by these days. For a small dose of sunshine, look to Northrim Bank.
The plunge in oil prices that has forced the state into spending billions in savings is temporary, according to Mark Edwards, Northrim economist, in a presentation on Thursday.
Edwards thinks oil prices will rise in the near term given projected growth in global demand and a dropoff in the glut of supply that has pushed prices down to the $50 per barrel range. He also projects an increase in Alaska oil production in 2016 and 2017 and points out that oil companies are investing in the state's large fields with a time horizon of two to three decades.
"In the second half of this year, we're going to see the excess oil supply diminish and prices rise," Edwards said.
While oil prices remain low, the state can rely on its substantial savings, much of it in the $54 billion Permanent Fund, Edwards said. Voters will likely put up strong resistance to any politician attempting to extract that money.
Northrim Bank is one of three Alaska-based companies that are publicly traded. The state of the Alaska economy and predictions about the state's well-being influence investors' decisions on whether to buy or sell the bank's stock.
Gunnar Knapp, an economist at the Institute for Social and Economic Research at the University of Alaska Anchorage, called Edwards' presentation "refreshing, thoughtful and well-argued," but said he feels "somewhat less optimistic."
Pinpointing when and how high oil prices will rise is difficult, and there is rarely consensus, even among those tracking the market closely.
"The key issue is 'if low prices are temporary,' " Knapp said, quoting a slide from Edwards' presentation. "But what if they aren't temporary -- or are more long-lasting?"