Last December North Dakota’s oil production hit an all-time high, but output fell more than 3 percent last month as the state’s shale producers struggled to keep the good times rolling in the face of the recent plunge in global oil prices. As the WSJ reports, this price dip is making the first real dent in the extraordinary economic boom brought on by shale in North Dakota:
Bakken crude has always been expensive to produce and ship to refineries. When oil prices started to fall last year, Bakken oil producers slowed down spending. Fewer rigs actively drilling for crude-oil sources means less work for the roughnecks and truck drivers who service the new wells. […]All this has cooled the hiring frenzy. Indeed, recently layoffs have begun in the Bakken oil patch, says Paul Stromme, a supervisor at a company that lays pipelines. Companies are “doing some culling,” he adds. “Now instead of taking anyone who walks through the door, they can be more choosy.”
We’re far from anything approaching a bust, but today’s bearish market is tempering what was once boundless enthusiasm for shale’s transformative powers in states fortunate enough to have the right kind of untapped reserves. Tax revenues from oil production dropped a whopping 40 percent from August of last year to January 2015 in Texas; North Dakota’s revenues fell 21 percent over the same time period.But if you think oil-producing states here in America are struggling, think of how dire the situation is in nations that rely on oil revenues for the majority of their budgets. Petrostates like Venezuela and Iran are in a bad way, as is the rest of OPEC (not to mention sanctions-weary Russia). Here in the United States it’s private firms facing the brunt of the costs of cheap oil, and many of these producers are busy finding ways to still turn a profit by streamlining processes and maximizing efficiencies.And of course, cheap oil is an economic boon if you’re buying rather than selling, so for the rest of America these bargain basement prices are a welcome change indeed.