It’s not yet clear how much could be lost if the inexpensive gas trend continues into the new year.
“Gas prices nationally are about 52 cents per gallon less expensive than a year ago, which is the greatest year-over-year savings since 2009,” according to AAA Monthly Gas Price Report: Gas Prices More Than 50 Cents Per Gallon Cheaper Than 2013 on Dec. 3. “AAA estimates that Americans are saving about $200 million per day on gasoline compared to a year ago.”
Cheap gas is not good for the oil industry in Wyoming. For now there will be no reduction in oil production, but if gas remains cheap, the industry could slow in the spring or summer, said Bruce Hinchey, president of Petroleum Association of Wyoming in Casper.
“Bad news for the county evaluation,” said Park County Assessor Pat Meyer. “We count a lot on oil and gas production. They’re paying at least half of your taxes.”
In 2014, Park County’s valuation was $871,694,681. Of that, $470,298,972 was oil valuation, according to figures Meyer provided.
The recent diminishing value of oil has only been in effect for the last couple of months, so it should not be felt in Park County this year. How much it will impact the county next year is still to be determined. “It’s a little premature,” Meyer said.
County residents will not likely feel a reduction in services next year, but some county projects may be cut, Meyer said.
Park County’s assessed value has been around $800 million for the last four years. Taxes based on that assessment help fuel the county’s $28 million budget. The county has experienced reduced revenue before, Meyer said.
In the 1990s valuation was more than $250 million to more than $391 million per year, according to Meyer’s figures.
The county has $17,025,474 in reserves, Meyer said.
Still most oil wells in Park County are established wells and companies will continue pumping, Meyer said.
If oil production slows it will reduce revenue to the state of Wyoming so the Wyoming Legislature might have to tap into discretionary funding, Hinchey said.
The Legislative Stabilization Reserve Account contains $2-billion, according to a Dec. 15 Associated Press article.
Whether it will affect the job market is still up in the air.
“That’s the 64-dollar question,” Hinchey said. “Is it going to impact jobs?”
Companies are not drilling new wells and shutting down old wells, said Jerry Herweyer, manager of J&R Well Service in Powell.
The price for a barrel of oil was $56 Dec. 16, Hinchey said. Only time will tell whether the price remains low, Hinchey said.
December 2013, a barrel of oil was fetching $100. On Thursday, the price was less than $55, according to Nasdaq.
Herweyer said he believes the price could plummet more. “I don’t think we’ve seen the bottom of the downturn,” he said.
A Christmas bonus
Many people are taking those savings and spending the money on Christmas.
“Every time those drivers head to the pump, it’s costing less than it did a week ago, a month ago, a year ago,” said Lynn Solomon, Mountain West AAA spokesperson in Helena, Mont. “Those are real savings for motorists and real dollars that we’re not putting into our gas tanks, and that may translate into more disposable income during the holiday season.”
“Yes, if the price of gasoline falls, people should have more money to spend (and save), including on Christmas presents,” said Edward B. Barbier, economics professor at the University of Wyoming, responding to an email Dec. 9.
Discounted gas is sort of like a raise in pay.
“The typical American motorist, who spent $3,000 in 2013 at the pumps, might be $800 a year better off — equivalent to a 2 percent pay rise,” The Economist stated in a Dec. 6 article, “The new economics of oil, Sheikhs v shale.”
“Consumers are experiencing ‘sticker delight’ as gas prices unexpectedly drop below $3 in much of the country,” AAA CEO Bob Darbelnet wrote in a Oct. 31 AAA article. “Lower gas prices are a boon to the economy just in time for holiday travel and shopping.”
Thirteen states had at least one gas station selling gas for less than $2 per gallon Dec. 15.
The average price for a gallon of regular unleaded in Wyoming was $2.71 on Dec. 16. It was $3.14 one year ago, according to GasBuddy.Com.
For travel during the holidays gas prices will be less of a barrier this year, but the biggest factor is probably weather and driving conditions, Solomon said.
The global supply of oil is greater than the demand, said Gregg Laskoski, Southeast senior petroleum analyst for GasBuddy.Com.
Saudi Arabia appears to be letting the price fall so producers with high production costs will go under, The Economist reported in the Dec. 6 article. But there are other reasons for the sharply reduced prices at the pump.
Canada, Mexico, Louisiana, Alabama and the Bakken formation in North Dakota and Montana are producing cheap crude too, Laskoski said.
If the Organization of Petroleum Exporting Countries (OPEC) can keep the price of crude low it will discourage a lot of domestic shale oil fracking, Laskoski said.
“Saudi Arabia possesses 18 percent of the world’s proven petroleum reserves and ranks as the largest exporter of petroleum,” said OPEC’s website.
He believes other OPEC nations will pressure the Saudis to reduce production. With less production the demand for oil increases and so does the price, Herweyer said.
Fracking entails injecting a mixture of water, sand and chemicals into shale formations to release the oil within.
United States’ crude oil refinery inputs averaged more than 16.6 million barrels per day during the week ending Dec. 5 — 271,000 barrels per day more than the previous week’s average. U.S. crude oil imports averaged about 7.7 million barrels per day the week ending Dec. 12, up by 365,000 barrels per day from the previous week, according to the U.S. Department of Energy.
“We (United States) have become the world’s biggest oil producer just this past year,” Laskoski said.
In the mid-1980s a barrel of oil was $10 per barrel. “The industry has been through this before,” Hinchey said. “I’m sure it will survive.”