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Return to normal cited for sagging oil prices
The drop in Alaska oil prices represents a return to a more accurate reflection of the value of the crude, not a significant decline, state analysts said.
Oil prices hit a 20-month low when a barrel of Alaska North Slope crude oil dropped to $47.73 Jan. 18.
The recent drop comes after record highs just six months ago.
However, the lower prices represent a normalizing market, not a significant decline, according to Kurt Gibson, acting deputy director of the state Division of Oil and Gas.
“The price spike last year was probably the exception,” Gibson said, referring to 2005, a year of historic hurricanes.
After storms cut production in the Gulf of Mexico, the price of Alaska North Slope crude rose to meet lower supplies and peaked at a record $75.73 on July 14.
“Eighty dollars wasn’t the real long-term value of a barrel of oil,” Gibson said.
EIA credits high inventories, warm weather The U.S. Energy Information Administration, which provides statistics and analysis on energy industries, attributed the recent drop in prices to high inventories and a warm winter across the Lower 48.
The price of crude oil directly affects gasoline prices but it is not the only factor driving prices and the effect is not immediate at the pump.
Gas prices in parts of the country have dropped to $2 a gallon.
That’s not likely to last, said Doug Reynolds, an associate professor of oil and energy economics at the University of Alaska Fairbanks.
“It’s just kind of the lull before the storm,” he said.
Reynolds said world supplies are shrinking while demand is growing.
Though demand in the U.S. dropped 1 percent last year, Reynolds said, that does not indicate a long-term trend and prices should rise again in response to the summer driving season.
Alaskans may not notice the difference over the next year, but looking over the next decade, shrinking supplies could mean price increases, Reynolds said.
How the prices affect consumers and producers depends on whether they hold or not, Gibson said. If prices remain steady over the next year, it could create a budgetary problem for the state.
“The state of Alaska is going to feel the impact, no doubt about it,” Gibson said.
—The Associated Press
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