Oil-Field Govts. Feel Pinch from Price Drop

Oil prices are coming down. While that’s good news for consumers, the rural communities that depend on oil revenue to pay for local government services and infrastructure may have a different experience.

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annual, recurring expenses even as some states have invested in permanent funds to meet long-term needs. High oil prices can mask these problems in fiscal policy, but today’s lower prices—if they persist and if drilling continues apace—may expose these weaknesses. Communities will have less money to deal with the same intensity of industrial and population-growth related impacts.

To understand how it might play out, we revisited an earlier report to see how local revenue could change.

The chart at the top shows the decline in revenues associated with the change in oil price. Here’s how we reached that conclusion.

The graphic below shows how production at an average well in North Dakota’s Bakken shale fields declines over time. The data is from DI Desktop and the Duke Energy Initiative. (Drillinginfo” and “DI Desktop” are trademarks of Drilling Info, Inc. and, along with the Drillinginfo data reproduced herein, are used with permission.)

needs of shale communities and what states can do to help them benefit amid continuing uncertainty.

Mark Haggerty is an economist at Headwaters Economics, an independent, nonprofit research group that focuses on the Western United States.

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