BISMARCK - OPEC's decision this month to maintain existing oil output will fail to push rival producers out of the market because rising global crude demand should soon lift prices and boost drilling activity, North Dakota Governor Jack Dalrymple said.
Since November, the Saudi Arabian-led cartel has held to a policy of unconstrained output, an approach many suspect is designed to flood global markets with more crude, push prices lower and punish rivals, including North Dakota, the second-largest U.S. oil producer.
"It's not surprising that Saudi Arabia would finally make a decision that they are not going to be the sole equalizer of supply and demand around the world," Dalrymple said in an interview with Reuters this week at his capitol office. "They are going to expect other countries to be part of controlling supply."
Yet the strategy seems to have backfired, as producers have had to become leaner and more efficient, steps that allow them to profit despite the more than 40 percent drop in prices over the past year.
At the same time, Dalrymple said he's glad oil prices have fallen from around $100 per barrel roughly a year ago to about $60 today.
"Looking back, people are realizing that the $100 price level probably hung on longer than it should have," he said.
With global demand for oil rising, North Dakota - which produces about 1.4 percent of the world's oil each day - and other shale oil states likely will have to boost production soon, rather than slowly watch it dip, as has happened in recent months, Dalrymple said.
"Those two forces will come together at some point, hopefully not too far in the future, and we're going to have a stable price situation," he said.
Dalrymple praised recent safety rules from the United States and Canada that will require thicker hulls, among many other standards, to improve the safety of crude-by-rail transport.
"I think the improvements are very good," he said. "The biggest factor in safety of transport are the cars themselves."
The rules come after Dalrymple and other state regulators instituted new rules last fall requiring every barrel of crude be filtered for dangerous types of natural gas.
"It's helpful to see these as one part of the overall safety equation," he said. "Still, it's important to see that North Dakota crude is not different from other light, sweet crudes around the country."