The price of oil and what’s happening in the oil patch in Montana, North Dakota, and Wyoming has an important impact on Yellowstone County’s economy. And, like many parts of the country, the price of oil is a dual edged sword — low prices reduce the cost of production in other industries and for consumers which has economic benefits on one side of the equation, while higher prices increase the cost of production for other industries, but it bolsters the strength of the oil and gas industry which is important to the well-being of a whole host of supportive businesses, many of which are located in Yellowstone County.
As the price of oil is projected to drop following a recent period of record production in the Bakken, it could mean a weakening in Yellowstone County’s local economy, as production is reduced, following the age-old law of supply and demand.
The “price crunch” is reported to have actually begun in October, after North Dakota posted all-time highs for oil and gas production in September.
North Dakota reported 1.36 million barrels of oil per day production in September, an increase of 66,751 barrels month over month. Gas production, meanwhile, tipped 2.532 million cubic feet per day, an increase of 89,008 cubic feet per day month over month.
Up or down, the price is likely to change after December 6 which is when OPEC will meet to decide whether to cut production.
North Dakota sweet crude has been at $40, and Bakken crude about $5 to $6 above that, which is well below the numbers it would take to grow rig counts or add a lot of wells to inventory.
Several factors are contributing to the price crunch. U.S. Sanctions against Iran were to have reduced production by a million or so barrels per day, which prompted OPEC to increase production. But, President Donald Trump granted waivers to several countries, and said in press conferences that he was doing that to lower oil prices.
U.S. production, meanwhile, has not slowed, and is expected to reach 12 million barrels per day next year. But activity could drop off given issues such as weather conditions, lack of workforce, flaring regulations, and transportation.
In addition to its output records, the state also captured a record 2.075 million cubic feet per day of gas.