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Three Energy Stories Making Headlines In Oklahoma This Week

Oklahoma City made national headlines last week when a few stations on the south side started selling gasoline for less than $2 per gallon.

Friday morning West Texas Intermediate crude oil was trading below $60 per barrel, with Brent crude right around $63.

Low Oil Prices Affect Education, Health Funding

Lower pump prices mean more money for consumers, but earlier this week Oklahoma’s finance secretary Preston Doerflinger told The Journal Record’s Marie Price “watch out for February revenue numbers.” The State Board of Equalization meets Thursday to estimate available revenue for the 2016 fiscal year, but in February the board certifies the revenue so the governor and lawmakers can actually craft the budget.

“This could be the first time in any recent history that I’m aware of that the February numbers could be lower than the December numbers,” Doerflinger said. “Usually, you might see a little uptick between the December and February certifications.” Such a drop could postpone a scheduled state income tax cut that relies on a revenue trigger this year to take effect in 2016 and mean further budget cuts for state agencies and programs.

Education and healthcare could feel that revenue pinch the most.

An oil derrick stands in front of the Oklahoma state Capitol.
Credit Brent Fuchs / The Journal Record
/
The Journal Record
An oil derrick stands in front of the Oklahoma state Capitol.

“If revenue falls during the session, legislators can make decisions," says Adam Brooks, the managing editor of The Journal Record. "They can decide, 'Hey, we're going to protect schools.' But if the projections don't drop lower until after the session, that could mean across the board cuts, and some education officials said that could really hurt things like teacher benefits and health insurance."

Oklahoma’s Commissioner of Mental Health and Substance Abuse Services Terri White said a drop in federal matching funds means her agency needs at least $10 million to maintain its current level of services, and there’s a trickle-down effect here, too.

“Last year, the agency cut $20 million in services, especially for children," Brooks says. "But the vast majority of people with drug and alcohol problems, they already have jobs. If they're left untreated, it means they miss work, they aren't productive, so these problems seem like they just belong to individuals, but they really affect companies and the economy as a whole."

Producers’ Perspective

The Journal Record’s Sarah Terry-Cobo covered a recent Oklahoma Corporation Commission meeting, where Houston economist Michael Maher from the Center for Energy Studies at Rice University said a four-decade-old ban on U-S crude oil exports has had what he called a “counterintuitive effect” on Oklahoma drillers.

The export ban hurts producers, because of the nation’s refining infrastructure, Maher said. Not all crude oil is created equally. The vast majority of the oil produced from tight shale rock formations is considered light oil. But most of the refineries in the U.S. are configured to handle heavy crude. It isn’t cheap or easy to modify a refinery, so refiners continue to import heavy crude from Canada, Mexico and Venezuela. And a dramatic increase in domestic production in the last eight years has led to a wide differential between domestic oil prices for West Texas Intermediate and world crude prices. That leaves a glut of light crude, Maher said. Refiners won’t likely shift to refining more light crude until there is a $15 to $20 price differential between WTI crude prices and world prices, he said.

But allowing more domestic oil on the world market could push U.S. gas prices even lower.

"That could cause the overall price to drop," Brooks says. "If refineries are paying less for the heavy crude that they turn into gasoline, they might be able to pass the savings along to the consumers." 

Continental Coup?

“Oklahoma recruits in Texas” doesn’t sound odd during football season, but billboards in Houston pointing toward Oklahoma City are trying to convince Texans there are thriving careers in oil and gas in a city with less traffic congestion.

The Journal Record’s D. Ray Tuttle says Continental Resources has been promoting itself in the nation’s fourth-largest city by reaching out to energy workers stuck in Houston’s legendary traffic.

[Continental Vice President of Human Resources Ray] Gonzales said the company bought a total of eight billboards, split between the west side of Houston and two each on the north and south side of The Woodlands, Texas, aiming at potential employees. Continental also uses energy conferences as a tool to reach potential hires. The billboards went up in advance of a February North American Prospect Expo convention, Gonzales said. The expo brings oil and gas professionals from around the world to Houston. “We are a relatively new company, and we have learned from recruiting that many people simply have not heard of us,” Gonzales said. “So we attend NAPE and other conferences, set up booths and let them learn about us.”

Larry Grillot, the dean of the University of Oklahoma’s Mewbourne College of Earth and Energy says Houston energy companies recruit Oklahoma as well, but Brooks says it’s not necessarily as public as highway billboards.

"It goes both ways," Brooks says. "Everybody in the industry is trying to get everybody's best people."

Grillot estimated that 40 to 50 percent of OU graduates in petroleum engineering, geology and geophysics remain within the state. “For many, they prefer to work for an international company and have that chance to go overseas,” Grillot said. “Others might go to Dallas and work for a good domestic independent. It depends on the kind of career they want.”

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The Business Intelligence Report is a collaborative news project between KGOU and The Journal Record.

As a community-supported news organization, KGOU relies on contributions from readers and listeners to fulfill its mission of public service to Oklahoma and beyond. Donate online, or by contacting our Membership department.

The Journal Record is a multi-faceted media company specializing in business, legislative and legal news. Print and online content is available via subscription.

Brian Hardzinski is from Flower Mound, Texas and a graduate of the University of Oklahoma. He began his career at KGOU as a student intern, joining KGOU full time in 2009 as Operations and Public Service Announcement Director. He began regularly hosting Morning Edition in 2014, and became the station's first Digital News Editor in 2015-16. Brian’s work at KGOU has been honored by Public Radio News Directors Incorporated (PRNDI), the Oklahoma Association of Broadcasters, the Oklahoma Associated Press Broadcasters, and local and regional chapters of the Society of Professional Journalists. Brian enjoys competing in triathlons, distance running, playing tennis, and entertaining his rambunctious Boston Terrier, Bucky.
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