Prices Must Come Up Before Crude Oil Production Does

May 10, 2017

Oil Well

Oil production continues to fall in Wyoming. The first records of the state’s production in 2017 show it’s down about 14% from the same time last year. 

Oil and gas commissioner Tom Fitzsimmons said that decline is likely to continue. To stop it, prices would need to stabilize first around $55 per barrel while they have recently been between $46 and $48 per barrel.

Fitzsimmons said prices are driven up if there's less supply, though that supply keeps on coming. He pointed to the state’s network of ducts

He said, "What that means is companies are spending an awful lot of money to drill a well, but they’re yet to come online for production. And so as long as there’s an inventory of wells that could come online… there’s a pretty big headwind to keep prices down.”

Fitzsimmons said even though production may be down right now, there’s been an increasing number of wells in the state since last year.

Another potential factor that could increase Wyoming’s crude oil production is the limiting of international supply. That could theoretically happen at the OPEC (Organization of the Petroleum Exporting Countries) meeting later this month.

Fitzsimmons said Wyoming production could increase if OPEC countries decided to cut supply, but that’s unlikely to happen: "As long as they have obligations to their population, they’re going to continue to produce as much oil as they can to meet those obligations regardless of what agreements they have in place."

Fitzsimmons added part of Wyoming’s challenge with crude oil production remains constant: the state can’t change the fact that it’s distant from refineries and that it’s more expensive to refine it.