With the price of oil hovering around the $US18 ($35) a barrel mark, this is a long way off budget forecasts of between $US25 and $US26 bbl. It has been calculated that for every $US1 fall in the average price, it takes $17 million from the budget bottom line.

West Australian Chamber of Commerce and Industry economist, Mr Dan Engles, warned if the oil price stayed at present levels, the Government could lose up to $57 million in forecast oil royalties.

Oil prices have essentially collapsed since the September 11 attacks on New York. Not helping matters has been a slowing global economy, which has seen oil prices fall from $US29 bbl to less than $US18 earlier this month.

The WA Government earns around $450 million a year in royalties from the North West Shelf project and other local oil producers.