A 'crude' price in ND: Oil futures fall in the state and across the country
The price of sweet crude oil in North Dakota has dropped by almost $20 in the last year. Producers may not like the decrease, but it is welcomed by consumers, officials said Friday.
"This drop in prices, you might look at it as a good news, bad news," said Tancred Lidderdal, senior economist at the U.S. Energy Information Administration in Washington, D.C. "The good news is we do benefit from lower gas prices."
Oil companies could sell the black gold in the state for $94.69 per barrel a year ago. But as of Tuesday, they had settle for $73.25.
North Dakota peaked in July 2008 with $136.29, according to the State Department of Mineral Resources.
The state seems to follow the same trend as the country. The light sweet crude noon price fell in May after almost three months at more than $100 per barrel. It fell below $80 on Thursday and settled at $79.39 Friday.
The national all-time high for oil also topped off in July 2008 at $141.37.
The drop is due to confidence in the global economy, and growth has been deteriorating, Lidderdal said.
"At the same time, the world crude oil supply picture is looking better than it was just a few months ago, in particular growth in U.S. production, particularly from North Dakota," he said.
Prices are set on a global stage and work back and differ from state to state, such as North Dakota, State Pipeline Authority Director Justin Kringstad said from his Bismarck office. The state doesn't have a problem getting it to market. It's selling it at that market that is the issue.
"Even if we can get a barrel out of the Williston Basin, we are putting it in into a market that is congested," he said. "It just gets back to the basic economics of supply and demand."
More supply means lower prices, Kringstad said, but companies are trying to "debottleneck" the markets with a higher demand, such as building more pipelines to other places.
"The markets will work themselves out given enough time," he said.
Gas prices also tend to follow crude oil prices, Lidderdal said. The national average was down 22 cents per gallon from a month ago Friday, according to the AAA daily fuel gauge report.
North Dakota's average gas price dropped about 5 cents in the last month, according to the AAA report.
Falling prices may be bad for the producers, but consumers get the benefits, Kringstad said. High prices help producers and mineral rights owners, but then the customers suffer, he added.
"A high crude price then translates into high gasoline prices, just like high corn prices would be good for farmers but bad for people buying cornflakes," he said. "That's just the nature of the industry."
Prices may rise in the next few months since it is the travel season and oil supply will tighten up, he added, but a large increase is not expected.
"At this point, what we have learned from the crude oil market is that we should learn to expect the unexpected," he said.