10 October 2004
Barrels of fun
Prices for Oklahoma crude oil generally lag behind the oft-quoted New York Mercantile Exchange rates for the OPEC stuff, but $50 a barrel has come to the Oklahoma oil patch, and activity is starting to pick up as a result.
And it's perfectly obvious why: a well capable of producing a mere two barrels a day, about average for the state these days, is good for $3000 a month now, justifying the expense to force it out of the ground. (The standard barrel is 42 gallons.)
The days of the "wild wells," of course, are gone forever; we're not going to see a repeat of the No. 1 Mary Sudik, which blew out in the spring of 1930 and spewed oil all over central Oklahoma for eleven days before being brought under control. No one knows for sure how much "Wild Mary" actually coughed up, but it's estimated she was peaking near 3,000 barrels an hour. Present-day oilfield equipment can handle these higher pressures; of course, with the fields largely played out, it's now necessary to force higher pressures into the wells to squeeze out a barrel or two. It wasn't worth it at $10 or $15 a barrel: the costs exceeded the potential revenue.
The state eventually figured out that its 7-percent Gross Production Tax wasn't helping matters, and in 1998 reset the tax to a variable rate based upon the price of crude. A similar structure applies to natural gas production, and gas prices are similarly high: Oklahoma Natural Gas advises that the stuff they piped into my house this month cost them $6.02 per dekatherm, a dekatherm being equal to 1 million British Thermal Units.
With prices where they've been lately, the state is able to levy the full 7-percent tax; in fiscal year 2004, which ended 30 June, the Gross Production Tax brought in $560 million, about $100 million more than had been projected, a small but definite boon to Oklahoma's ongoing budget woes, and this was before the huge run-up in oil prices. It's this sort of thing that keeps me from gritting my teeth as I spend $24 to fill up my car (figuring 12.9 gallons, at which point the orange Low Fuel light has just come on, at $1.86).Posted at 5:21 AM to Family Joules