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.