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Slope crude price back above $30 OPEC production levels not increased; strikes by oilfield workers in Nigeria, Norway add to perception oil supplies can be interrupted Dan Joling Associated Press Writer
High petroleum prices have been a pleasant surprise for state officials who estimate how much money the state will earn next year.
Oil prices reached three-month highs on world markets June 13. Alaska North Slope crude for delivery in July closed at $30.24 for delivery to the West Coast. The price also cracked the $30 level in March.
“Prices remain a lot higher than we thought they would,” said Chuck Logsdon, chief oil economist in the Department of Revenue.
Alaska North Slope crude reached $32.30 per barrel on March 7, but drifted down to $24 per barrel by the time Revenue Commissioner Wilson Condon released the department’s Spring 2000 revenue predictions on April 11.
The department projected an average market price for this year of $23.28 per barrel. Logsdon said actual revenue should be within pennies of that when tax returns are collected.
For the fiscal year that begins July 1, forecasters predicted oil at $22.76 per barrel. So far the average price for oil to be delivered in the new year has been near $25 per barrel, Logsdon said.
High prices help state For every dollar in annual increase, the state earns another $65 million, narrowing the gap between petroleum earnings and spending and requiring that less be pulled from the Constitutional Budget Reserve to make up the difference.
Prices rose the week of June 12 in part because buyers and sellers anticipate that the Organization of Petroleum Exporting Countries, which meets next week in Vienna, may not increase production.
“Everybody’s kind of waiting around to see what OPEC does next week,” Logsdon said.
Strikes by oil field workers in Norway and Nigeria also have added to the perception that supplies could be interrupted, Logsdon said.
In March, in reaction to the high crude prices, OPEC agreed to put an additional 1.5 million barrels per day on the market and forecasters thought that would bring prices down. Logsdon said the increased production has not been sufficient to rebuild lean stocks.
“We’re right back there with the prices again,” he said.
OPEC members agreed they would put another 500,000 barrels per day on the market if price stayed above $28. But oil ministers in some member countries indicated June 13 they are in no hurry to do so.
“It’s not an automatic thing,” Logsdon said.
Crunch from supply and demand U.S. Sen. Frank Murkowski said high prices are simply a result of supply and demand.
“We’re pulling our reserves down faster than we’re replacing them,” Murkowski said. “Any time you do that, the supply and demand crunch become a reality.”
Demand is not limited to the United States.
“A significant portion is associated with the economic recovery in Asia,” Murkowski said.
Clinton administration officials are continuing to pressure friendly OPEC nations to increase production, Murkowski said. But there are any number of other factors that contribute to the petroleum reserve shortages, as well as shortages in gasoline and heating oil.
“Nobody is standing in line to build new refineries,” Murkowski said, because of potential liabilities.
Restrictions on domestic exploration, including Alaska’s Arctic National Wildlife Refuge, limit opportunities for adding reserves. Murkowski said energy produced by nuclear reactors is discouraged by the waste problem. In the Pacific Northwest, Murkowski said, many advocate removing dams, which would knock out hydroelectric generation, not to mention replace barge traffic and add thousands more trucks to the highway system.
That leaves coal as a fuel, Murkowski said, which carries clean air objections.
“So where’s the energy going to come from?” Murkowski said.
Prices probably won’t stay high Logsdon said there remains a lot of skepticism that oil prices will stay high. Like Murkowski, Logsdon said other factors could figure into the price picture, such as an increase in interest rates by the Federal Reserve.
“If the economy slows down, that will take some of the demand off, too,” Logsdon said.
BP Exploration (Alaska) Inc. spokesman Ronnie Chappell said when oil prices have hit high levels in the past, OPEC members have not stuck to agreed-upon levels of production.
“It’s clear that OPEC discipline remains,” Chappell said. “We’re as surprised as anyone.”
The high price will not immediately spur more exploration, Chappell said. More important to BP’s development plans is completing the merger with Atlantic Richfield Co. and achieving cost savings from a single operator agreement on the North Slope. That will allow the company to move forward with development around Alaska’s largest oil fields.
“There are fields that can be developed using existing infrastructure that can have a near-term impact on production,” Chappell said.
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