Markets have been panicking on news of falling oil prices.
For most people across the country, the only discernable impact has been a drop in gas prices. But in oil-producing states like North Dakota and Wyoming, it’s cause for concern -- and a headache for state planners. Wyoming Public Radio’s Stephanie Joyce reports.
Every month, North Dakota's Department of Mineral Resources hosts a press conference to discuss the latest oil production figures . It's called the “Director’s Cut” and it’s normally a pretty low-key affair: local reporters show up and banter with agency director Lynn Helms, while reporters from the Wall Street Journal, Bloomberg and Reuters log on via the
Internet. At exactly 1:30 p.m., the webcam clicks on and the whole thing goes live.
(:06s) “Thank you everyone. It’s nice to be here for the October webinar.”
This past week, Helms started by reporting what he usually reports: that oil production in North Dakota has gone up and more wells have been drilled. But the only thing reporters really wanted to know, he took his time getting to: what’s going to happen to North Dakota now that crude oil prices are tanking?
(:12s) “We’ve taken a look at the break-even oil price on a county-by-county basis and we have three counties that right now, at less than $70/barrel, are below break-even.”
How big of a deal is that?
(:06s) “We’re talking less than a ten percent impact. But still, if it’s your county… it’s a significant impact.”
That means fewer drilling jobs, fewer loads of gravel to buy, and fewer miles of road to build in those places. But the impact goes beyond those counties--it hits the budget office in the state capitol, Bismarck. North Dakota’s budget planners were banking on prices staying at $90/barrel. They’ve convened a Halloween meeting to reconsider.
(:18s) “I am quite positive there will be a revision, looking at what oil prices are today -- and hopefully that two week period will give us a sense of the trend, whether we’ve reached the bottom or we’re continuing to go down.”
North Dakota isn’t the only place where low oil prices mean budget troubles. In fact, the very people who have the most control over the global price of oil -- members of the OPEC cartel -- also depend on high oil prices to fund their governments. But the group’s most powerful country, Saudi Arabia, has signalled it’s willing to live with low prices if it means hanging onto market share. Among the targets: U-S shale.
(:06s) “The global markets don't know how to respond to something that's brand spanking new. That’s shale oil.”
That’s Niles Hushka . He heads up KLJ, the consulting firm that studied break-even prices for North Dakota. The United States has produced more oil in recent years than anyone ever anticipated would be possible. That’s contributed to the current glut that’s caused prices to fall. But Hushka says for now, no one on the ground in oil-producing states is making huge changes to their plans.
(:10s) “I think what we’re seeing right now is an industry that can’t quite figure out what’s happening. So, the industry doesn’t want to overreact.”
In Wyoming, State Geologist Tom Drean is definitely not overreacting.
(:04s) “There’s been a long history of oil prices going up and going down.”
Wyoming doesn’t produce nearly as much oil as North Dakota, and it doesn’t have a detailed analysis of break-even prices like North Dakota. But Drean says so long as prices stay above $80 a barrel, there probably won’t be any big changes in drilling activity. And even below $80 a barrel, he says the state’s emerging oil boom isn’t likely to bust.
(:09s) “I think it’s safe to say it’ll be a slower ramp up than it would be if the price of oil was $100 a barrel. It’s difficult at this stage to say what the exact impact would be.”
But that’s something the state’s budget forecasting group -- which Drean is part of -- will have to predict. They’re supposed to come out with a preliminary estimate in the next week of how much money is going to be available in the coming year for funding things like schools and roads. All signs point to that being an extremely difficult task.
With help from Emily Guerin in North Dakota, I’m Stephanie Joyce, for Inside Energy.
