20190325-bc-oilactivity (copy)

This file photo shows a pump station on the Kern River Oil Field.

Barring further escalation in Middle East tensions, the modest surge in oil prices that followed Friday's U.S. drone strike against Iranian military officials in Iraq isn't expected to have much impact on Kern County's economy, property tax revenues or local gasoline prices.

Sustained increases in oil prices typically do lead to higher gas prices and greater local investment in petroleum production and jobs. But observers said Monday they see no sign the latest geopolitical turmoil will affect oil supply or demand.

"We just don’t know what to expect next, but we’re certainly not expecting a major (supply) outage, like closure of the Strait of Hormuz or anything like that,” UBS Financial energy equity strategist Nicole Decker said Monday, referring to the geographical chokepoint between the Persian Gulf and the Gulf of Oman.

The oil market's immediate response to Friday's drone strike was a small rise in oil prices. Two local grades of crude, Midway-Sunset and Buena Vista, rose about 2.7 percent just before the weekend. That magnitude increase was in line with U.S. and global benchmarks.

Oil prices have since settled down somewhat. The respective global and U.S. benchmarks, Brent Crude and West Texas Intermediate, were trading Monday afternoon at less than 1 percent below the prices they closed at Friday.

Bakersfield independent oilman Chad Hathaway said by email he does not think local oil producers will ramp up activity in order to try and capitalize on higher prices.

California drillers have a hard enough time raising money to finance their existing activity level, he asserted. Without substantial outside investment, any potential increase in oilfield spending would likely have insignificant effects, he added.

"We would need longer sustained oil prices not based on geopolitical issues to really consider additional investment over our current budgetary restrictions," Hathaway wrote.

The timing of Friday's attack may have limited the event's impact on the local oil industry. If it had come just before New Year's Day, instead of after, it might have raised the oil price used by the county Assessor's Office to calculate oil producers' property taxes.

Kern Assessor-Recorder Jon Lifquist noted the small spike in oil prices came after he stopped gathering price data for annual property assessments.

"Although we can consider any information before January 1, information after is unknowable … and not allowed to be taken into consideration," he said by email.

The small increase in oil prices probably won't last long enough to affect gas prices, said Marie Montgomery, spokeswoman for the Automobile Club of Southern California.

It's possible the price of a gallon of gas will rise by a cent or two, she said, but more likely it'll be nothing more than a blip — unless Middle East tensions worsen.

Medium to large oil producers operating in Kern said they expect little impact from last week's price surge. Some took the opportunity to criticize the Newsom administration's recent oil crackdown and efforts to scale back in-state production.

Chevron said its local activities are part of a global operation and that oil prices fluctuate constantly. "Given these facts," the company said by email, "Chevron needs to look through the economic cycles that drive oil prices as we plan our local operations."

Santa Clarita-based California Resources Corp., explaining it has no plan to increase activity because of Friday's price spike, said by email Middle East turmoil "should be a major wake-up call to California policymakers" taking steps to reduce in-state oil production.

Noting that California relies heavily on foreign oil, much of it produced in Iraq and Saudi Arabia, a CRC spokesman asserted that California "should start to break this dependence on energy imports by expediting permits for native production, which would encourage capital investment in Kern County and local job creation."

Similar points were made by Bakersfield-based Aera Energy LLC and Berry Petroleum Co. LLC. They said the state's regulatory environment, not just geopolitical uncertainty, drives investment and job creation.

“The lack of regulatory (certainty) and the lack of permits is a bigger driver for the industry at this time," Aera spokeswoman Cindy Pollard said.

John Cox can be reached at 661-395-7404. Follow him on Twitter: @TheThirdGraf. Sign up at Bakersfield.com for free newsletters about local business.

(6) comments

Comment deleted.
Lilyrose

Nice and wise.

Lilyrose

Go ahead and dislike me.

" The lack of regulatory (certainty) and the lack of permits is a bigger driver for the industry at this time," Aera spokeswoman Cindy Pollard said. Not exactly true.

Fact is there is too much oil in reserve. More supply than demand. It's that simple. The inefficient extraction of crude from shale is costly. Water usage is high. Steaming of said water takes energy. Add in the chemicals. A list of chemicals can be found on FracFocus. Refining is time consuming and dirty. All this makes local drilling costly in more ways than one.

All major oil company stocks prices are low. The local drillers are anxious and would actually desire a disruption in the Middle East.

Frankly, it is a shame that local drillers flooded the market causing the price of crude and gas to drop in value. From a business point of view it was damaging.

Yes, turmoil brought on by politics is welcomed by small and large producers. Hathaway and Halliburton.

However, Providence Strategies will campaign with integrity.

Chad Hathaway

Lilyrose, your energy ignorance is staggering. How much do the environmental radicals pay you to blog? Now I'm starting to wonder if countries like Saudi Arabia, Iraq and other fund the radical enviros in California? Any insight on that Rose? Less CA oil means more from there...

California production is declining, we are NOT experiencing a surplus here. Shale production is primarily coming from the Permian Basin, Eagleford, Bakken and a few other Basin's.

In California we are importing 70% of our crude from foreign places. Places that wouldn't allow you to drive a car or quite frankly say anything in a forum like this.

Lilyrose

Mr. Hathaway: You do not know who you are are speaking to. 30 years of being involved with LNG internationally. My ignorance? Environmental radicals pay me?

You educate Me in UAE ?

Time you come clean to these good folks in Bakersfield. The Al Saud family has been gentle to you and the other local players.

Wadaeaan ----

Chad Hathaway

Al’abalah!

I sure don’t know who I am speaking to. You hide your name as if it somehow emboldens you.

You must not have learned much during your 30 years in international energy trading. Nobody ever taught you how the product you were shilling was harvested via fracking. Kind of fundamental #1 don’t you think about knowing what you do. Possibly you mixed up LNG with LPG and we’re actually a propane clerk at the gas station?

Don’t lie..Al Saud is the one paying for those THC laced cookies you all eat at the local Sierra Club meeting. Things are becoming clearer now. I’m seeing the close relationship that probably exists between the Saudis and your compadres. Only they benefit when people like you kill hard working CA folks,

Lilyrose

Energy trading ? Nope.

Mr. Hathaway your unprofessionalism and limited knowledge of the world market does not prevent you knowing one important thing.

The means in which your business is done is harmful . The state of California only wants to protect its citizens. Not because they want to, but because they must. Poor stewardship and the unwillingness to acknowledge environmental health damage done due to your practice , has created these decisions.

It would have been honorable of you and others to self regulate. It didn't happen.

.

* I have a retraction . In my anger I pressed 30 instead the 3 was to be a 2. 20 years. Some forms of petro energy are cleaner only because the geography. Middle East. California, however, has used the easy and cleaner reserves up. What is left should be left alone.

There is no

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.