Friday, March 13, 2015

News on Crude Oil Prices

Tyson Smith, Regional Economist

Residents of the Uintah Basin continue to keep a close eye on crude oil prices. As has been discussed on this blog, and by news outlets across the nation, falling crude oil prices have had a negative effect on domestic oil and gas production and employment. Falling oil prices shrink the profit margins of U.S. extraction companies, which leads to less exploration, more rig closures and more layoffs. The questions being asked most often in oil and gas communities are: "When will prices stabilize?" and "At what level?"

While it is unclear what the answer to these questions will be, two recent articles in the Wall Street Journal directly addressed those issues.

Both articles, one by Georgi Kantchev and Bill Spindle and the other by BenoƮt Faucon, explore the possibility that oil prices my still have room to fall.

Kantchev and Spindle ask, "After their sharp drop late last year, oil prices have been trading in a relatively steady band for more than a month, raising an obvious question: Has the market hit a bottom?", before answering, "A number of fundamentals suggest not yet..."

Faucon addresses the possibility of stable gas prices even more bluntly when he quotes the monthly report from the International Energy Agency, which states, "On the face of it, the oil price appears to be stabilizing. What a precarious balance it is, however behind the facade of stability, the rebalancing triggered by the price collapse has yet to run its course, and it might be overly optimistic to expect it to proceed smoothly.”

Residents of the Uintah Basin will have to wait (along with the rest of us) to get the answers to these questions. But until then, energy prices will continue to be a major topic locally, nationally and globally.