Last week we got the latest oil production report from North Dakota’s Department of Mineral Resources which showed output in November was down less than 5 percent from the state’s all-time record high. In fact, oil production was up slightly. What’s more, according to the DMR, as of today the state has 49 oil rigs actively drilling.
That’s just plain inaccurate.
The link goes to a Bloomberg article with a slightly more accurate headline that’s still pretty misleading. “The North Dakota Crude Oil That’s Worth Less Than Nothing,” the banner over an article by Dan Murtaugh and Javier Blas reads.
So what’s going on? “Flint Hills Resources LLC, the refining arm of billionaire brothers Charles and David Koch’s industrial empire, said it would pay -$0.50 a barrel Friday for North Dakota Sour, a high-sulfur grade of crude, according to a list price posted on its website,” Murtaugh and Blas report. “That’s down from $13.50 a barrel a year ago and $47.60 in January 2014.”
So it’s not that North Dakota crude oil is worth less than nothing. It’s that one particular type of crude oil is worth less than nothing. A very low-quality type of oil North Dakota actually produces very little of.
The latest DMR report states that North Dakota produced an average of 1,176,314 barrels of oil per day. Of that total, less than 15,000 barrels per day – or about 1.2 percent – is North Dakota Sour.
Meanwhile North Dakota light sweet crude, which is the bulk of what the state produces, was at $18.25 per barrel as of Friday according to Flint Hills Resources.
That’s still not great, of course, but reporting an oil bust based on a negative price number for a type of low-quality oil that represents about 1 percent of what North Dakota produces is kind of dumb.