Low Oil Prices Send Chills Through Oil Patch
WILLISTON, N.D. (AP) — Marcus Jundt moved to Williston from Minnesota almost four years ago and has opened four restaurants there since. Food isn't propelling his business, though. It's oil.
"Everything I've done in Williston is a derivative of oil," he says.
That oil has averaged $96 a barrel over the past four years, fueling more drilling, more hiring, and bigger appetites in North Dakota, Texas, Oklahoma and elsewhere. Now oil has hit a rough patch, plunging to $79 from $107 in June on fears of a global glut. Many expect these lower prices are to stick around for a while.
Lower oil prices, while good for the broader U.S. economy, are a threat to what has been a surprising and dramatic surge in oil production in the U.S., and to drilling communities that have come to depend on oil money.
"If the price gets low enough and stays there long enough I'm sure it will affect the number of people and the amount of money that will be spent in the greater community — and I have exposure to that," Jundt says.
U.S. oil production has gone up by 3.5 million barrels per day, or 70 percent, since 2008. High prices fueled the boom, providing oil companies the profits and investor cash to buy up land, pay for drilling rigs, and develop new technology. Places like Williston, a once-sleepy farming town, thrived with increased economic activity, well-paying jobs and rising tax revenue.
Prices would have to fall lower, and stay low for a while, to turn the U.S. oil boom into a bust. Wells that are already producing won't be shut off and enormous projects with long-time horizons will still be built. Many drillers have funded next year's drilling plans by selling oil in the futures market.
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