From time to time we check in on the state of the oil industry to determine whether we are approaching a time when it might become profitable to drill along the Beartooth Front. We’re far from it. As of the close of business on Monday, the price of oil touched a seven-year low as active rig counts dropped to their lowest levels since 2010, and pump prices in the area stayed at low levels.
Oil at 7-year low
Oil closed Monday at $37.60 a barrel, driven by a meeting last week of the Organization of Petroleum Exporting Countries (OPEC). At the meeting members failed to reach a decision on a ceiling for oil production. Analysts said that OPEC would likely maintain its production around current levels of 31.5 million barrel per day. In addition, new volumes will come to the market once US sanctions against Iran are lifted in 2016, contributing to an excess of supply over demand of around a million barrels per day. Some analysts see the price of oil dropping as low as $20 a barrel.
When we last checked in on May 12, oil had risen to $59.14 after crashing to $48.59. In June of 2014, at the height of the Bakken boom, oil was hovering around $105 per barrel.
Active rig counts at a 5-year low
As a result of the price decline, North American rig counts dropped to 737 at the end of last week, a decline of seven from the previous week, with a total decline of 1,183 rigs from a high of 1.920 a year ago.
In North Dakota, the active rig count has fallen to 64 from 191 in the last year, and state officials say they expect it fall even further after the OPEC meeting. North Dakota has 1000 permitted wells waiting to be fracked, but no operators willing to drill in the current environment.
Year-over-year oil exploration in the US is down 64.7%. Gas exploration is down 44.2%. The weekly average of crude oil spot prices is 38.8% lower than last year and natural gas spot prices are 41.7% lower than last year.
Local gas prices remain low
It’s a bleak picture for the industry, although it means a holiday bonus for those of us who purchase gas locally. You can pump gas at Costco in Billings for $2.09 a gallon, $2.16 at Maverik in Bridger, $2.18 at the Town Pump in Columbus, and $2.19 at the Town Pump in Red Lodge and the Cenex in Columbus. Those prices could be lower by Christmas.
The bottom line is that nobody is going to be drilling along the Beartooth Front very soon. But we should all be aware that when the oil companies come knocking with promises of economic growth and plenty of jobs, that promise is only as good as an oil market that we have no control of.
What we can control locally are the terms under which we allow oil companies to drill when they are ready. The state of the market is a bit of a reprieve for us, but we need to be ready when the market changes and the rigs return. That’s why landowner groups in Stillwater and Carbon counties are working on establishing citizen initiated zones to make sure that when the next boom is over, our way of life is maintained.
Falling gas prices and the uncertain future of the Shale Boom – November 14, 2014
The price of oil: drilling will continue for now, but we need to keep our eyes on the future – January 12, 2015
Checking in on the price of oil, gas, and declining rig counts – May 12, 2015