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N
orth
T
exas
E
nergy
O
utlook
• 3
Wednesday, October 29, 2014
By BARBARA GREEN
Will this oil and gas
boom continue for the
State of Texas ? No one
is willing to say for sure,
but there is still a lot of
money going into the
ground to help these com-
panies maintain growth.
There is no doubt, you
must drill economically
to have success. Other
big shale plays are be-
ing developed in other
parts of the world, but
the United States has a
big head start.
The cost of drilling
in the unconventional
shale plays also can be a
big factor. In Texas and
North Dakota the cost is
around $70 per barrel,
while others can top out
at $90.
Geology certainly plays
a huge role, but other
factors such as politics
and property rights can
muddy the process.
In a Sept. 25, 2014
ForbeS article, T. Boone
Pickens explained one
of the biggest factors in
America’s favor is private
ownership of mineral
rights.
He calls it unique in
a world where the state
has title to the oil and
gas under the acreage.
In Russia , Mexico, China
and the Middle East, the
government owns the
minerals and property
owners have to be “co-
erced,” he says to give
access to drillers.
American production
has helped create a glut
of oil, which is not sitting
well with OPEC. Prices
have plunged to $91.16
in early October, the low-
est price since May 2013.
OPEC could decide to
flood the market with
cheap oil trying to seize
back the market share
taken up by the U.S.
production.
While good for motor-
ists in lower fuel prices,
if the price dips below the
marginal costs of produc-
ing oil out of places like
the Bakken and Eagle
Ford, it could jeopardize
the “oil boom.”
Perryman emphasized
in the update, any projec-
tions of future growth
always have to take into
consideration possible
changes in regulation
and the political climate,
including environmen-
tal causes that can slow
growth.
Midwestern State Uni-
veristy Geology/Petro-
leum Professo Dr. W.
Scott Meddaugh said the
politics of OPEC are dif-
ficult to understand even
in their own countries.
He explains Saudi Arabia
can produce oil near the
bottom of cost per barrel
and with large volumes.
“They have wanted to
have oil in a certain range
of prices and dial it up or
down as they wanted.
What they will do now if
the price declines more?
No one knows at this
point. There is a lot of
speculation. They may do
nothing, and continuing
the same volume would
put further downward
pressure on prices,” ex-
plained Meddaugh.
In the October “Fis-
cal Notes” published by
the Texas Comptroller’s
Office, the question was
raised: “Has a 1970s ban
on oil exports outlived its
usefulness?”
What happens to Tex-
as if the ban is lifted?
Some estimate that
removal of the export ban
would net the state tens
of thousands of new jobs
due to additional oil ex-
ploration and production
but could crimp other
aspects of the industry.
Independent refiners
don’t like it because it
squeezes their margins.
For the consumers, the
price at the pump would
be impacted. The comp-
troller states the ban was
put in place as a way to
help guarantee American
fuel supplies and keep
gas prices from spiraling
out of control.
Michelle Foss, Ph.D.,
chief energy economist
and program manager of
the University of Texas
Center for Energy Eco-
nomics, said consumers
will feel price effects up
or down, as domestic
and international prices
are linked, but she adds
free trade makes mar-
kets more flexible and
responsive.
When asked about a
possible lifting of the ban
on oil exports, Meddaugh
said the biggest issue will
be fluctuating oil prices
both domestic and inter-
nationally.
“Is it good or bad, I
don’t know,” said Med-
daugh, “From a produc-
er’s perspective driving
the price up is a positive,
but for consumers not so
much gas will go up.”
On Oct. 16, a sudden
plunge in the price of oil
sent economic and politi-
cal shockwaves around
the world. The global
price closed at $84.47
per barrel, down about
$31 from its high point
of the year. Oil consump-
tion globally is 91 million
barrels per day.
According to analysts
the global price of oil has
been relatively stable for
nearly four years, averag-
ing $110 per barrel. Oil
exporting countries brace
for budget shortfall and
importing nations benefit
from the low prices.
C o n s ume r - d r i v e n
economies like the U.S.,
benefit paying the low-
est average per gallon
price for gas since 2011
at $3.16. In Montague
County, recent gasoline
prices dropped to below
Texas boom or bust?
$3 for the first time sev-
eral years.
On the other hand, low
prices could threaten the
Graphic reprinted with permission from the Texas Comptroller
Graphic reprinted with permission from the Texas Comptroller
boom in oil production
because it is expensive to
produce. OPEC counties
and other big export-
ers will see the biggest
impact.
Oil may be cheap to
produce in countries like
Russia or Venezula, but
government budgets are
based on oil at $100 or
more.