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Higher gas prices not expected to significantly impact oil industry or state budget

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HOUMA, LA (WVUE) -

Hurricane Harvey lived up to predictions that the devastation it caused would drive up gasoline prices, and no one knows what the impact from Irma could be. 

Still, the higher prices at the pump have not translated into a boon for the oil industry in south Louisiana, and they're not expected to have a huge impact on the state budget.

"Terrebonne Parish relies heavily on deepwater drilling, which is down to the lowest it's ever been, and so we're experiencing about a 12 percent dip in our sales tax. So to counter it, as parish president, I've cut all my departments 23 percent, but we did not lay off any people. We stopped merit pay raises and we did a hiring freeze to make the difference up for the sales tax, said Gordon Dove, president of Terrebonne Parish. 

He said the price of a barrel of oil must rise much higher to stimulate a lot of activity.

"Oil's not going  to come back until the price stabilizes - probably at $60, $65, then I think you'll start seeing an influx,” said Dove.

Harvey caused refineries in Texas to shut for days. 

"You look at Houston, shutting down the refineries would affect the oil. I think what you're going to see in Florida, because of the gas situation and people evacuating  Florida, you know, you're going to see a spike in gas pricing, and I think gas is still very available, it's just getting it to the consumer, going from industry storage to private storage, which means in people's cars and extra tanks,” said Davie Breaux, deputy port director at the Greater LaFourche Port Commission.

Still, Breaux does not believe the mass exodus from Irma will prompt more drilling in the Gulf of Mexico.

"To ramp up production, production has to go through refining and refining has to get to that final product so I think there was plenty enough stored, it's just a matter of getting it delivered in the expedited time frame needed,” Breaux said.

The higher gas prices are not expected to help the budget of Terrebonne Parish or state government for that matter.

"Well, it really doesn't do that much on our operating budget because the gasoline tax goes entirely to our highway program, our road program, so it will benefit that to some extent, but it will be very limited. I think rising prices is probably attributable to problems related to the storms. Presumably prices will level back off at some point in time, so that's not really going to be a long-term solution for us,” said Jay Dardenne, who is Gov. John Bel Edwards' commissioner of administration.

While drivers may pay more to fill up their vehicles in the short run, it's higher oil prices that will ultimately help the state's bottom line in the long run.

"When oil prices rise, production increases. That's what really will drive Louisiana's economy when we get back to seeing the kind of production we like to see,” said Dardenne.

Gov. Edwards spoke to the Rotary Club in Houma Thursday afternoon after meeting behind closed doors with elected officials from that area and from lower Jefferson Parish. They spoke about the hurricane season, the state budget and the economy.  

"The oil and gas sector is not hitting on all cylinders. The price of oil remains too low to have the level of activity that you all need and have become accustomed to over the years,” said Edwards to dozens gathered at the Rotary Club luncheon.

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