WILLISTON, N.D., Feb. 19 (UPI) -- Low oil prices haven't yet dimmed confidence in North Dakota, though there may be concerns lingering over the mid-term horizon, those on the ground said.
Oil prices have remained above what some consider the floor price for the recent downturn, trading in recent sessions above the $50 per barrel mark for West Texas Intermediate crude oil. That's more than 18 percent above late January lows, but still 50 percent less than June prices, forcing many in the industry to lay off staff and cut spending on exploration and production.
Oil prices are down in part because of a weakened global economy and a market swing to the supply side. Oil produced from U.S. shale, like the Bakken formation in North Dakota, is behind some of the momentum.
The North Dakota Industrial Commission reports production in December, the last full month for which state data are available, was 1.2 million barrels per day, an all-time high. Production may soon decline, however, with the number of rigs engaged in exploration and production off around 30 percent from early 2012.
The trend in rig activity is mirrored globally. Oil services company Baker Hughes shows in its latest rig count report activity is down 5 percent internationally from last year and 23 percent for the United States.
Baker Hughes, along with its peers at Schlumberger and Weatherford, announced layoffs amid the market downturn. Companies like BP have also cut back, though there's been no sign yet of trouble in the North Dakota oil patch.
Continental Resources, one of the largest oil producers in North Dakota, has cut back on drilling activity, but has no preparations for a long-term slowdown.
"We have no layoffs planned," spokeswoman Kristin Thomas told UPI.
North Dakota's economy is growing at a faster rate than any other state in the nation, with real gross domestic product growth of 9.7 percent reported for 2013 by the U.S. Department of Commerce. Gov. Jack Dalrymple, in his State of the State Address, recognized the potential impacts of the oil market downturn for his state, but held out expectations for a correction.
Lee Lusht, a real estate agent and former president of the Williston Area Chamber of Commerce, said most state planners are fiscally conservative, setting aside billions of dollars in a rainy-day fund to protect against deteriorating market conditions. She said most of the pessimism surrounding the state's economy is likely coming from those who've never set foot in the Bakken region of the state.
"We are still selling houses as fast as they come on the market, construction is going gangbusters, billion-dollar projects are moving forward," she said. "Maybe [a slowdown] will happen, but most of us are moving forward with the confidence that it won't."
State data show overall employment in North Dakota expanded year-on-year, with employers adding 24,500 jobs year-on-year, a 5.4 percent gain. Even as oil prices continue to raise concerns about broad-based economic problems, Lusht said most companies apart from Continental are riding out the storm, adding job fairs in the state are selling out.
In broad terms, the slump in oil prices is having an impact on the nation's economy. A January report from Challenger, Grey and Christmas, Inc., found the economies in states thriving on the nation's oil boom may experience a "steep decline" in employment across all sectors. In its latest report, however, the U.S. Labor Department found job growth continuing in North Dakota.
The state in its latest forecast expects to take $8.3 billion in tax revenue from oil and gas for 2015-17. That forecast assumed oil prices in the $74-82 per barrel range. At current prices, the revenue forecast is almost 67 percent less.
David Flynn, chairman of the Department of Economics at the University of North Dakota, said some parts of the state may feel the effects of low oil prices differently and severity depends in large part on the durability of the bear market for crude oil.
Most of the economies in the east of the state are not tied directly to oil, and there may be at least some modest protection from rival sectors like agriculture. Overall, however, Flynn said the economic impacts of the oil price slump will catch up with the state.
"There are concerns that the significant fiscal benefits of oil are over for the state," he said. "While there is not the expectation that oil will disappear from the state economy I think the mood can best be summarized as the boom is over."
