A broad study of the natural gas industry in Oklahoma is only one
of several affecting the petroleum industry to be considered by
House of Representatives committees during the current interim
How far these studies will go and to what extent
they will affect the petroleum industry probably won't be known
until when or if they are completed. One of these is by Rep. Clay
Pope, D-Loyal, which is proposal No. 03-106.
It calls for a study
of natural gas availability and production in the state. It asks for
a review of existing incentives for drilling, and search for new or
more effective ones.
It will seek discussion of what the proven
and unproven reserves in the state are. The sponsor also wants to
talk about what the market price is predicted to be and what effect
that will have on Oklahoma citizens and state appropriations.
appears to be an ambitious program, but much of what the study
encompasses is data that probably already exists. It is the reasons
behind such data that are important. They probably won't reveal much
that is new either, but the study should give natural gas producers
an opportunity to repeat what they have been saying for
There are large reserves of natural gas in the state. Its
availability inevitably depends on price. Far more of it becomes
available when the cost is $5 per million British thermal unit of
gas than at $2 for a simple reason. At the higher price and with tax
incentives, there is more reason to drill because of a quicker
return on the investment dollar.
Then as prices go up, more
drilling occurs and more gas becomes accessible. When there is an
abundance of gas, competition drives the price down. When there is a
shortage of gas, demand forces the prices higher.
That seems so
axiomatic you would think it needs no explanation. It is doubtful
any government by law or fiat has successfully been able to repeal
that simple law of supply and demand without creating shortages or
higher prices, or both. For years, leaders in the petroleum
industry, perhaps more than any other group, have preached that
economic truth seemingly to little avail.
They continue to be
ignored by much of the consuming public, which rails at higher costs
and complains when there are shortages. Even those who recognize the
basic factors often fail to understand the time lag that goes with
increased drilling and production.
For Oklahomans, a natural gas
shortage is not a likely occurrence, but the price of natural gas to
Oklahomans nearly always is governed by national, and perhaps in the
future, worldwide gas supplies and prices.
As for predicting
future natural gas prices, it is done on a regular basis, but not
always with any degree of accuracy. It is like predicting the
weather or the stock market. So many factors go into such forecasts.
Over the past three or four years, natural gas prices have
skyrocketed to $9 and plunged below $2, sometimes without
significant lead time warning.
There is no question the state
treasury benefits from higher natural gas prices. They have ranged
in the $6 level for the past several months. This has poured extra
millions of dollars in gross production tax revenues into the state
Many in the industry believe natural gas prices are
stabilized for the current year at between the $5 and $6 level
because the nation's reserve of natural gas in storage is at its
lowest point in years. …