As Oklahoma Economists Eye Slumping Oil Prices, Energy Executives Urge Calm
Crude oil prices have plummeted to the lowest level in three years, a slump analysts say is fueled by reduced demand due to stalling growth in Europe and China, and booming supply from domestic production in the U.S.
In Oklahoma — a state where, historically, finances have risen and fallen with the fortunes of the energy industry — the tumbling oil price has been met with different reactions from oil and gas company executives, economists and state finance officials.
For context: Currently, Oklahoma is the country’s No. 5 oil producer and No. 4 natural gas producer, the most recent data from the U.S. Energy Information Agency show. And Oklahoma is among the states whose economies are “particularly dependent on oil drilling,” writes Vox’s Brad Plummer, who recently examined a Council on Foreign Relations report that detailed the state’s most sensitive to oil price changes.
Here’s one key graphic from that report:
Economists: Remember History
In many ways, Oklahoma’s oily economy looks a lot like it did right before the big 1980s oil bust, Oklahoma City University economist Russell Evans tells FOX-25’s Keaton Fox:
“It certainly reminds you of those times a little bit, and those times were so, so scary, so real, so significant in our economic history that we look back on it with pause for good reason,” Evans said.
In fact, Oklahoma only recently returned to pre-bust economic levels. It was, in short, an economic recession so large, it lasted nearly 25 years.
“We’re not quite back to some of those [measures of] reliance, which is probably a good thing, but we certainly are back to a level where we are reliant on the industry as an engine of economic growth,” Evans said.
Oklahoma’s economy is more diversified than it was in the 1980s, Fox reports, but the oil and gas industry still accounts for about 20 percent of all the jobs in the state — “and almost two-thirds of those created since the recession ended in 2010,” The Oklahoman reports.
Finance Officials: ‘Monitoring’
State Treasurer Ken Miller is among the state finance officials who are watching tumbling oil prices that could reduce state government revenue, The Journal Record‘s Marie Price reports:
While we will monitor the effects of softer crude oil prices, clearly Oklahomans are continuing to earn and spend more as reflected in this month’s numbers,” state Treasurer Ken Miller said Wednesday.
October gross production taxes on oil and natural gas generated $73.58 million, just 0.1 percent more than in October 2013. Gross production collections fell 5.6 percent from September, but rose 14.6 percent from the prior 12-month period.
Oil Executives: Not Alarmed
But Harold Hamm, the billionaire Oklahoma oilman CEO of Continental Resources recently told Forbes’ Christopher Helman he isn’t worried about the crumbling price of crude:
“We need more supply. It’s crazy to think that China and India won’t continue to demand more oil,” Hamm says. “Even if overall economic growth slows, oil demand will grow, because they want something other than a bicycle; they want to farm with a tractor instead of oxen.”
Executives at other Oklahoma energy companies are echoing Hamm’s long-term optimism, The Oklahoman‘s Adam Wilmoth reports. The brass at Chesapeake, Continental, Devon, SandRide and Unit, all used their quarterly earnings calls as an opportunity “to try to calm shareholders amid tumbling oil prices”:
Executives this week have focused on relatively strong financial and cash positions as they have shown why they think their companies can wait out lower prices.