A few years ago when oil prices were climbing at an alarming rate, the State of North Dakota had one of the healthiest economies in the country thanks to fracking and it's very fortunate location on top of a massive heap of oil just below the surface. Then along came Saudi Arabia and decided that it could afford to take a hit on lower oil prices, and then decided to set Middle Eastern oil prices so low, it made no sense for the U.S. to keep drilling in its own wells because the cost to extract, refine and sell far outpaced the price to simply import more oil from the Middle East.
As such, thousands of oil rigs in the United States and Canada have shut down and ceased drilling because economically it just did not make any sense to waste money paying workers for expensive North American oil. Thousands of oil company workers have lost their jobs in the past couple years, but a few select companies are trying to keep the infrastructure building going in order to keep their state's economy strong so they can keep being proud of themselves. This is (in my opinion) precisely what states like North Dakota are doing, and in the process are angering the public and the Sioux Nation.
Why is more oil infrastructure necessary right now? It isn't.
Well, first we have only to look at the current prices of oil to see that imports are still need to keep gas prices low, and keep consumers happy and safe enough to go out and spend money that normally would have gone to gas. Look at the drastic drop and consistently low oil prices of the past three years, still hovering around $46 per barrel:
Secondly, the number of actively operating oil rigs and drilling locations in North America is drastically lower than it was in the previous year, and the number of rigs closing on a weekly basis is still strong. Within the past week alone, the number of open oil rigs has declined by 218 in the United States (compared to the same week in the prior year), a decline by 38 in Canada, and a decline by 206 on an international level. You can learn a lot about the openings and closings of oil rigs by checking out Baker Hughes Weekly Rig Count.
So what does this mean for oil?
Basically, hold onto your butts and ease up on the development. I think many companies are trying to prepare in the event that oil prices spike all of a sudden, but the likelihood of that is extremely low, given how much oil is still coming out of the Middle East. Instead of trying to compete with the likes of Saudi Arabia, I would love to see the U.S. develop cleaner alternatives that are just as cheap as Middle Eastern oil. THAT would be something to be proud of...I'm talking to you North Dakota.
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