Slope crude price tops $30

Posted: Thursday, March 02, 2000

ANCHORAGE (AP) -- The price of North Slope crude oil on Wednesday topped the $30-per-barrel mark for the first time since late 1990, when the nation was on the verge of going to war in the Persian Gulf.

Alaska oil ended the day at $30.17 a barrel on the New York Mercantile Exchange, up $1.34 from its previous close.

The sustained price rally has the state rethinking its prediction that Slope production would average just over $20 a barrel during the fiscal year that ends June 30.

''We've blown by that,'' said Chuck Logsdon, the state chief oil economist. ''We're heading toward an average of something like $23 a barrel.''

If that $3-per-barrel upswing comes to pass, the state treasury would collect an additional $200 million or so, according to figures on the Department of Revenue web site. That would shrink the state's budget gap for the fiscal year to less than $300 million.

A smaller gap would mean a smaller withdrawal from the Constitutional Budget Reserve, and lengthen the life of that savings account beyond the latest projection of January 2004.

''It extends the time we have before we reach the cliff,'' said Eldon Mulder, R-Anchorage, and co-chairman of the House Finance Committee.

Mulder said most of his legislative colleagues are relieved to have more time to come up with a long-range plan, but ''we still need to recognize the need for it.''

Rep. John Davies, D-Fairbanks, a finance committee member, called high prices a mixed blessing.

''Certainly for the state of Alaska, in the short term, it's a great deal,'' he said. But the main question for long-term planning should be whether the current price represents a trend or an aberration.

The last time Slope crude settled above $30 was Nov. 29, 1990, about a month before the Persian Gulf War started. The price of $30.49 that day was heading down as fears of war-related oil shortages ebbed. The next day the price tumbled by nearly $4 a barrel, and $30 oil became a memory.

Prices jumped Wednesday after Venezuelan oil minister Ali Rodriguez denied reports that Saudi Arabia, Mexico and Venezuela had agreed to increase output.

The current climb in oil prices -- up more than threefold in 15 months -- has followed an agreement last year by the Organization of Petroleum Exporting Countries to trim back its production.

The reduced production, combined with growing demand in Asia and the winter-bound Northeast, has shrunk oil inventories to their lowest level in nearly 40 years, Logsdon said.

''Most folks watching this unfold expect OPEC to increase production,'' he said. ''The market is sending very strong signals that it wants more oil.''

Rodriguez is scheduled to meet with Saudi and Mexican oil ministers in London on Thursday, but the countries probably will not say exactly how or when they will end the supply crunch, said Tim Evans, senior energy analyst at Pegasus Econometric Group.

Even if OPEC were to announce an immediate production increase, the oil would not arrive in U.S. in time for April delivery, he said.

Logsdon has been surprised that the higher price has endured as long as it has, and he says that stands to encourage more activity on the North Slope.

''There's a lot of oil up here that's attractive at $20 that's not attractive at $12,'' he said.

Ronnie Chappell, an Anchorage-based spokesman for BP Amoco PLC, said the high prices aren't tempting the state's largest oil producer to stray from its business plan.

''Typically when prices get this high, OPEC discipline starts to erode,'' he said. ''What we've seen in recent months has been remarkable, and not something on which to base long-term planning.''

But Chappell said higher prices have strengthened BP's cash flow, making more money available for drilling new wells at Prudhoe Bay and other fields.

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