WESTWEGO, LA (WVUE) - In a state where the budget benefits from higher oil prices, there was a bit of good news Thursday: A commitment to cut production in the Middle East caused a surge in prices.
Oil prices surged by 10 percent, to around $47 a barrel on word that the oil-producing nations would cut production by a million barrels a day.
"It is a positive announcement from OPEC. You always have to see if the OPEC countries will follow through," said Gov. John Bel Edwards.
And Louisiana will be watching closely. Even though prices are up, the price is less than half what it used to be, and that's hurting state employment.
"We are on schedule to lose 17,000 jobs this year," said LSU economist Dr. Loren Scott.
Earlier this year, declining oil revenues and the resulting impact on the state budget forced lawmakers to deal with a $2 billion deficit.
"Unfortunately, it's not going away. This past fiscal year will end around $300 million short. Revenue didn't come in quite as anticipated," said State Sen. John Alario, R-Westwego.
While the oil industry's impact on the state budget is always a concern, the governor said it's less so than in the past.
"Oil-related revenue used to be 42 percent of the budget in the early 80s. It's 12 to 13 percent today." Edwards said. "It's still significant for us, but more so with the families that have been laid off."
But there is a silver lining. Low natural gas prices have fueled unprecedented industrial expansion.
"We have $148 billion in announcements right now...and $100 million in Lake Charles," said Scott.
And the state could benefit from an infusion of up to $2.6 billion in federal flood recovery money.
"After Katrina we had a big influx of new revenues because of the economics that came after," said Alario.
Edwards said a special session next year could go a long way toward restructuring Louisiana taxes and putting the state on a stronger financial footing.
"I'm excited about our future and we will rise to the challenge," Edwards said.
A challenge that could become a bit easier, if oil prices continue to rise. Under the new OPEC agreement, Saudi Arabia, the largest oil producer, is expected to cut production by 350,000 barrels a day.
Two years ago, oil prices were as high as $100 a barrel. At one point since then, they dropped to as low as $26 a barrel.