(KPAX) It’s been tough times in the oil patch, as the industry has dealt with the double whammy of the COVID-19 pandemic and a collapse in the price of oil.
Monday brought news that some of the nation’s biggest lenders will begin to seize the assets of struggling shale oil companies in the U.S.
Alan Olson, executive director of the Montana Petroeum Association, said you only need to look at today’s oil prices to see why optimism is hard to come by.
“Southern Montana/ northern Wyoming crude this morning was $8.54 a barrel,” said Olson. “You get into the Shelby/Cut Bank area, $14 a barrel this morning. One year ago in that same area, it was $54 a barrel.”
Olson said the current downturn has already cost Montana hundreds of jobs. Producers are choosing to shut in their wells, meaning they are turning off the pumps, and that has Olson worried about small refineries.
“How long are the refineries going to be able to hold out at their current rate of production, if we’re not moving fuel?” Olson said. “We have to move fuel to keep the refineries going. There are some projections that gasoline and diesel use could drop by as much as 30 percent. I wouldn’t be surprised if we see some of the smaller refineries shutting down at that point.”
Olson has been through the good and the bad times in oil. He told MTN News on Monday that the current conditions are considerably worse than the downturn of 1986, and the slowdown in the late 1990s.
“It hasn’t been that long ago we saw $140 a barrel crude oil. Hopefully some people put some money in the bank at that time,” Olson said. “It’s not all that different than farming. It’s a commodity market. You have to have a willing buyer, and right now we don’t have a lot of willing buyers.”
In the short term, consumers can enjoy a drop in pump prices. Both Costco and Sam’s Club members paying as low as $1.69 a gallon in Billings this morning, according to online gas tracker Gasbuddy.com .
Olson described the current squeeze in the Bakken as “very serious,” the result of small independent companies paying for exploration and production work with borrowed money. Many of those firms, he said, are most likely trying to renegotiate the terms of those loans with their bank.
And unfortunately, the new OPEC deal to cut oil production by nearly 10 million barrels a day has not buoyed prices at all.
“I’m always trying to be an optimist,” said Olson. “But it’s pretty gloomy right now.”