Submitted by The Port of Olympia
Two significant changes to the national and global economies are impacting the Port’s 2015 operating income. In response, the Port has acted to defer many projects planned for this year. Taking this precaution will actually result in the Port having a larger year-end cash balance than was estimated in the original 2015 budget.
Increased Value of Dollar and Decreased
Value of Crude Oil Affect Global Trade
The strong U.S. dollar is causing U.S. goods—such as northwest wood products—to become more expensive in the global marketplace and therefore less competitive with foreign-produced goods. This may contribute to a decrease in exports by the Port’s wood products customers.
A strong dollar as well as the Middle East’s increased oil production has lead to decreased oil prices. Low oil prices affect the production of U.S. oil and therefore may affect a Port customer’s importing of ceramic proppants which are used in oil well development.
Today, crude oil is approximately $46 per barrel. Last August, when the Port began developing the 2015 budget, a barrel of crude was $96. This is a 52% decrease. The Port did not anticipate the unprecedented drop in oil pricing which is unseen in recent history.
Staff Defer Projects to Improve
Year-end Cash Position
As a result of reduced imports and exports at the Marine Terminal, the Port’s operating income is $1.2 million below what was originally forecasted for mid-year. The Port is responding by deferring $13.2 million of Port capital investment projects that had been planned for 2015. Due to this deferral, no borrowing is expected.
The anticipated result will be an improved year-end statement of cash amounting to $3.7 million more than was originally forecasted, for a total ending cash balance of $9 million.
The Port is beginning work on the 2016 budget and is taking into account the likelihood that the dollar will remain strong and oil prices will remain low throughout next year.
For More Information
See the Port’s 2015 Operating Budget and Capital Investment Plan, 2015 Second Quarter Financial Report, 2016 Budget Timeline, and other pertinent Port financial information at www.portolympia.com/234/Budget-Financial-Reports.
