1-11-13 Alaska's Economic Outlook
The State of Alaska's Economy...And the State's Future
"To Be Realistic Is Not Necessarily To Be Negative"
1. On January 4 we editorialized that Alaska's economy is unsustainable but 'fixable'.
2. On January 8 we linked readers to Energy & Capital's Keith Kohl's national column noting that Alaska's economy seemed 'doomed'.
3. Today, Alaska reader Eric Dompeling (NGP Photo) directs us to RBN Energy's piece, "After the Oil Rush - ANS Decline and the West Coast Crude Market."
Eric reviewed our January 8 piece, and wrote, "After seeing your article yesterday, I thought I would forward this to you as one more item of interest from the world at large. I receive articles of interest to the Gas and Oil industry from RBN Energy, a fundamentals analytics company that provides consulting and advisory services to the energy industry. They focus on the markets for natural gas liquids and crude oil. Most of their consulting work deals with acquisitions/divestitures and strategy development. The daily newsletter supplied by Rusty Braziel is both timely and accurate in its forecast regarding the US domestic energy market. I found it accurate in its Alaska market evaluation. I also found it disturbing in its prediction for the future of Alaska North Slope crude pricing and competition for market share on the West Coast. I thought this was worth sharing...."
Thank you for alerting us, Eric. The article below is consistent with all of the counsel we have gleaned from the references above: Alaska is in serious trouble and decisive action is required RIGHT NOW if disaster is to be avoided. What kind of action? As we have said in so many different ways here over the last decade: action to improve Alaska's investment climate and action to free Alaska from the death grasp of overreaching federal regulators.
Lastly, before we bring you this latest reference to Alaska's impending destiny, let us once again assure readers that it is both healthy and essential that we be realistic. The first step toward economic sobriety is recognizing that we have a problem. Accordingly, by being realistic, less knowledgeable readers should not regard us as purveyors of negativity. If we didn't have hope and if we weren't so positive, we wouldn't be so concerned and so dedicated to ACT. ; -dh
"THE ALASKA OIL RUSH IS OVER FOR THE TIME BEING"
RBN Energy by Sandy Fielden. Alaska North Slope (ANS) crude is produced from the Prudhoe Bay field on the northern coast of Alaska beside the Beaufort Sea (see map below). The field was discovered in 1968 by ARCO (Atlantic Richfield now part of BP) and Humble Oil and Refining Company (now part of ExxonMobil). Production started in 1977 after the Mid-East Oil Crisis raised crude prices enough to justify construction of an $8B pipeline from Prudhoe Bay to Valdez marine terminal. ... ANS served the US well at a time when Lower 48 production was declining and crude prices were rising. Now that picture has been reversed by rising domestic production and US refiners paying less for their crude than their international competitors do. West Coast refiners are currently paying high international prices for their crude but in the next two years they can expect to see prices fall to be more in line with the domestic WTI benchmark. Because of lower crude prices and the surge of domestic production from shale that is far closer to market, the Alaska “oil rush” is over for the time being. New production investment in that remote Arctic region will have to wait until the US has finished harvesting greener pastures closer to home. (Read more)