Events halfway around the world could temper Washington state’s glowing revenue forecast of nearly $1.5 billion in increased revenue for 2021-23.

Russia’s invasion of Ukraine — the largest such military operation in Europe since World War II — means higher fuel costs that could jeopardize the windfall.

“That will have a negative impact on the revenue forecast,” Stephen Lerch, executive director of the state Economic and Revenue Forecast Council (ERFC) told host Austin Jenkins during a recent episode of “Inside Olympia” on TVW.

As gas and heating oil become more expensive, Lerch said, consumers will spend less on everything else. That’s not to say Lerch and the ERFC were caught off guard by events in Eastern Europe. Lerch explained that the ERFC makes what it considers a baseline prediction, while also putting out pessimistic and optimistic forecasts.

“We did not assume in that baseline forecast this invasion, and if you look at our oil prices — and neither did the markets — so our oil price forecast, it’s not a forecast,” Lerch said. “It’s based on prices in the futures markets.”

The baseline revenue forecast has oil prices peaking around $86 per barrel, he said, but spot pricing showed oil prices at around $100 per barrel. “So, clearly our forecast is going to be too low in terms of energy prices,” Lerch said, “and of course, that will have an impact on inflation.” Inflation is already at a record high, with consumer prices having risen 7.5% annually, the fastest rate since 1982.

Nevertheless, Lerch was cautiously optimistic about Washington’s economic future, in terms of COVID-19, which appears to be transitioning from pandemic to endemic, and the prospects of a severe economic downturn.

Nevertheless, Lerch doesn’t see a recession coming any time soon. Economic indicators are a strange combination of negative and positive, the state economist said, noting that consumer confidence is down due to inflation and COVID, while jobs are plentiful.

That’s not to say Washington will avoid such a thing forever. “Will there be another recession at some point in the future?” Lerch asked. “Absolutely. It’s hard to see that in the near term.”