Posted 12/26/18 (Wed)
By Neal A. Shipman
Americans are relishing in the low gasoline prices that they are now paying at the pump thanks to the plunging of oil prices. With the price of regular gasoline selling at $2.46 a gallon on a national average, consumers are saving big money. And when compared to the average of nearly $3 per gallon that people were paying earlier this year, that 50 cent-a-gallon savings amounts to real savings for millions of Americans.
The significant drop in oil prices, and the subsequent 50 cent-a-gallon decrease in gasoline prices is probably one of the single biggest boosts in income that many families have seen in the past several years. And those savings at the pump translate into millions of dollars that consumers can now spend on other things. Things like paying their rent, buying clothes, dining out, or splurging on a vacation.
While America, as a whole, is somewhat giddy about the sudden and dramatic drop in oil prices, the same cannot be said for states like North Dakota that have benefitted greatly by the slow, but steady increase in oil prices. Thanks to a resurgence in higher oil prices in the past three years, North Dakota has once again become the mecca for thousands of unemployed Americans who came for good jobs in the state’s oil patch.
But the unemployed and those seeking to better their lives weren’t the only ones who benefited as North Dakota’s economy boomed with the development of the Bakken and Three Forks formations. The state of North Dakota benefited greatly as hundreds of millions in new tax revenues flowed into the state’s coffers. Thanks to that newfound wealth, the state has been able to reduce property taxes, build roads, improve our education systems, and pour billions of dollars into other needed projects across North Dakota.
High oil prices and high gasoline prices brought a mixed bag of emotions. And now, those same mixed emotions are being played out as oil prices and gasoline prices are falling.
The sudden drop in oil prices has sent a shock wave through the American and world economies. The stock markets, both American and foreign, have seen a year’s worth of gains wiped out, partly because of the uncertainty of oil prices and a slowing of the world’s economy.
While oil analysts believe that because of the announced oil production cuts by OPEC and Russia, oil prices should stabilize in the $60 per barrel range, but that increase in price may not happen until sometime in 2019 when the supply and demand for oil comes into balance.
Closer to home, after seeing the price of North Dakota Sweet Crude oil cut in half from $59.05 in September to $26.25 in mid-December, one has to wonder how this drop in oil prices will play out in the North Dakota Legislature, which is set to begin in January. No doubt there will be some legislators who believe that the drop in prices warrants a dramatic cut in state spending. And there will be those legislators who recognize that even at today’s oil prices, North Dakota will still be on the receiving end of hundreds of millions of dollars in oil revenue.
Anyone that has ever followed oil prices knows that only thing is certain - oil prices go up and they go down.
In spite of today’s lower oil prices, the good news is that North Dakota’s oil and gas industry is as vibrant and forward thinking as it has ever been. The industry has and continues to make millions of dollars of investments in new gas plants and pipelines, primarily in McKenzie County, to help make the United States more energy independent.
That is something that members of the North Dakota Legislature need to keep in mind as they tackle the state’s budget for the next two years.