North Dakota - Bakken Shale Oil 2017 - Time to Live in the Global Market
As the state of North Dakota witnesses a decline in sales tax collection based on low commodity prices, many are failing to account for global market factors. The chief of these is that foreign governments, whose budgets are dependent on the activity of energy-producing parastatal oil companies, cannot tolerate the low price of commodities for very much longer. This gives a great deal of motivation of OPEC members to negotiate for production caps or even cuts to buoy the price of the crude oil commodity.
The association of governments that own and operate parastatals with terrorist ties cannot be ignored either. Even small market disruptions like minor acts of terrorism, refinery shutdowns or attacks on pipelines as we saw last week in Libya cause wild shifts in the market, and the increasing possibility of large disrupting events cannot be ignored. The longer we witness few large market disruptions, the greater the statistical odds are that we will witness a large 'engineered' event to intentionally cause a market fluctuation.
Saudi Arabia's Aramco is poised to enter market privatization in 2018 by the offering of its IPO. This will undoubtedly change the market and disrupt the current paradigm for all parastatals, possibly forcing other OPEC members to auction or lease their minerals to simply avoid the pressure of losing valuable market share. This means to increase control of supply, which in turn will help control pricing fluctuations.
The last and most important market disruption may be a military conflict in oil and gas producing regions like Syria or Iran. With Syria now facing serious accusations of military war crimes against its own citizens and Iran facing accusations of violating the Iran Nuclear Deal, the globe is poised to witness more commodity market fluctuations through U.S. intervention.
Considering other global events is also important, especially North Korea's nuclear tests. Also on the watch list is China's expansion into the South China Sea, which threatens Freedom of Navigation and would potentially overcome U.S. hegemony in the region. China's military buildup on the Spratly Island chain threatens to allow China to control up to a third of global GDP and up to one-quarter of global crude oil transport.
North Dakota's commodity production and our budget challenges are under the influence of the global market forces, and it is the time that we start living and planning like we are aware of these facts. Experienced investors still believe that North Dakota's commodity markets will recover in time and there is plenty of reason to remain optimistic through the challenges we currently face.
Lindahl is president of Dakota Public Relations, economic development strategist in Tioga, N.D., and host of AM 1090 KTGO's Morning Lowdown.