Friday, May 06, 2011
The Bismarck Tribune, Bismarck, North Dakota
by Rebecca Beitsch, The Bismarck Tribune, N.D.
Instability in the Middle East is one of the contributing factors for a record-breaking month for oil tax revenue in North Dakota.
This is the first time the state has surpassed a $100 million benchmark for tax revenue, thanks to production in March, the most recent data available.
From November 2010 to February of this year, oil has brought in tax revenues hovering around $80 million, but in March that number rose to more than $100 million for the first time.
That brought in $20 million more than in February despite a drop in production of about 2,000 barrels.
The lower production levels didn't affect tax revenue because the taxation formula also relies on the price of crude. That rose about $14 between February and March to rest at $92 a barrel.
Rioting in Egypt in late January followed by a civil war in Libya starting in February and protests in Bahrain in March have all combined to take a toll on the price of oil, which is traded in a global market.
"The market is very sensitive to any kind of unrest like that. It's true that Libya has significant production, but it isn't to the extent that it couldn't be made up somewhere else," said Deputy Tax Commissioner Ryan Rauschenberger, adding that the price swings could be more of an emotional reaction as most Libyan oil isn't imported to America.
"It's more about the unrest than exactly where those barrels were going, and can Saudi Arabia pick up the slack? I think it has more to do with just the fact that it's in a region that supplies such a great deal of the world's oil," Rauschenberger said.
Patrick DeHaan, a petroleum analyst for the website GasBuddy.com, agreed with that interpretation, saying price increases are "very much an emotional reaction."
"The U.S. got 2 million barrels of oil from Libya in December 2010, compared with 34 million from Saudi Arabia," DeHaan said.
He said an increased risk of seeing a change in production is the underlying factor, but there are hundreds of aspects that impact the price of crude oil.
DeHann pointed to a weak U.S. dollar along with a slowly improving economy that has people driving more and creating a greater demand for oil.
Other factors in North Dakota's crude oil price are its quality, but also it's difficulty in accessing refining markets.
"This is top shelf crude oil," said Ron Ness, president of the North Dakota Petroleum Council. He said it's valuable because it can be used for a variety of products, is easy to blend with other types of oil and is just more easily processed than some other types of crude.
What keeps the price lower than it should be is that it is hard to get to market, something Ness said requires knocking 10 percent off the price.
As for the production, Kathy Strombeck, an analyst with the tax department, said levels have been steadily increasing over the past several months because of technology, and more recently, warmer weather.
"Are we producing more oil in North Dakota because of the Middle East unrest? Probably not. We're producing it because of the technology, the leasing, because of the good environment with the business climate here, all those things are why we're producing more oil," Strombeck said. "So there are two reasons North Dakota's oil revenues are doing well. One is certainly the higher price and the other is production."
Strombeck said in the short term she expects several more $100 million-plus months.
Copyright (c) 2011, The Bismarck Tribune, N.D. Distributed by McClatchy-Tribune Information Services.
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