North Dakota oil producers face declining oil economy

"We're fighting an uphill battle right now, and we better realize it as a state, as a producing state," said Ron Ness, President of the North Dakota Petroleum Council.

FARGO, N.D. – The North Dakota oil industry has faced crisis after crisis in 2020.

A federal judge’s latest order to suspend the service of the Dakota Access Pipeline is the latest.

“We’re fighting an uphill battle right now, and we better realize it as a state, as a producing state,” said Ron Ness, President of the North Dakota Petroleum Council.

It all started with price drops in oil due to a price war between Saudi Arabia and Russia.

Russia was asked to slow production due to less demand caused by the COVID-19 pandemic.

Russia refused to do that.

The price war affected North Dakota Bakken Oil, now a major competitor in the global oil industry.

The price of North Dakota Crude dipped as low as $11/barrel in May at the height of the Russia-Saudi Arabia Price War.

“The result of the Saudi-Russia increase in production actually brought prices to a negative for a short time. It’s pretty hard to sell something when you’re paying people to take it,” said Senator Kevin Cramer of North Dakota, “It’s hard to make any money.”

In May, Shale Analytics profiled Bakken Wells and found that nearly 40% of them were shut-in for the entire month.

North Dakota oil wells would slowly turn back on throughout June.

However, Monday’s order from a Federal Judge to stop oil flowing through the Dakota Access Pipeline has many oil producers scrambling to figure out what to do next.

“We’ve got a number of those back on, the economics had triggered to the point which I thought ‘Today’s the day, it’s going to be a good day.’ and then of course at about 8:15 yesterday my phone and e-mail started blowing up with the decision,” said Ness.

While the oil industry is facing a negative economic impact from these series of events, it’s also spelling disaster for the North Dakota state budget.

The budget is over 60% funded by oil gas extraction and production taxes as well as state sales taxes on said oil.

“That’s just one sector of energy that helps fund North Dakota’s economy, and you look at all of those impacts and how they effect every single person in our state,” said Ness.

Legislators say that new projections show over a billion and a half dollars will be lost from oil tax revenue this year.

North Dakota Crude oil is selling for $31 a barrel. It began 2020 at $53 a barrel according to the U.S. Department of Energy information.