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New deepwater cost cutting techniques could impact state treasury once again

After the oil bust in the 1980s, there used to be a bumper sticker seen on vehicles in Oklahoma, Texas and other oil patch states. “Please God, give me one more oil boom." Underneath: "This time I promise not to p*** it away."

It appears that perhaps at least another mini-boom is back, thanks to land-based drilling technology. Fracking, production from shale formations and horizontal drilling, have made the USA less vulnerable to world production/price manipulation. Recently, however, the Organization of Petroleum Exporting Countries (OPEC) — including Saudi Arabia and Russia — have cut production to boost prices.

Prices listed at Oil-Prices.net on Wednesday morning showed $65 a barrel for West Texas Intermediate crude and $75 for Brent Crude. Rising crude oil prices are putting more revenues in the Oklahoma state coffers and that can be very seductive for members of the Oklahoma legislature who have a history of spending it as though it will last forever. It doesn't.

Meanwhile, gasoline prices are inching up, eroding business and family budgets, especially in places like Lawton where everything has to be trucked in. Higher prices always attract new technology and ways of doing business. Maybe the high prices will not last long.

According to a story in Monday's online edition of Investor's Business Daily, new technology presents a new challenge for oil patch producers and states. "Once too costly except when oil prices were at the highest level, deepwater oil projects can now break even at price points similar to many low-cost shale fields."

"Crude prices can fall to $35 a barrel, less than half the current levels, and Royal Dutch Shell could profit off the Vito deepwater oil project, 4,000 feet deep in the Gulf of Mexico." It is the first major oil project in the Gulf of Mexico announced this year.

Of course, there are always disruptions and changes in business. Sometimes changes are obvious and sometimes they are unanticipated and devastating.

If the deepwater drilling projects can continue to cut costs and Oklahoma political leaders are mindful of the intended and unintended consequences on the state treasury, the state budget and the services it finances .

"So, enjoy the oil boom. Just don't blow it this time," writer Christropher Helman suggested in a Forbes magazine article four years ago. That is good advice. 

— The Lawton Constitution

The Lawton Constitution

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