Forum editorial: An upside to ND oil price slide
The news out of western North Dakota oil country is not bleak, but is not particularly heartening if you're in a wagon hitched to the oil boom. But not every wagon depends exclusively on oil.
The news out of western North Dakota oil country is not bleak, but is not particularly heartening if you’re in a wagon hitched to the oil boom. But not every wagon depends exclusively on oil.
The other side of the precipitous decline in oil prices is significantly lower fuel costs for every sector of the state’s economy. An August survey of Americans found that an overwhelming majority would rather have low gasoline prices at the pump than high crude oil prices at the well head. That sentiment is about the same among North Dakotans, despite the obvious benefit of high-priced oil for state revenue, and the boom’s unprecedented contribution to a humming state economy.
When the per-barrel price plunges from $100 to below $50, something has got to give. The give is showing up in news from the west. For example, the explosion in hotel and motel building to accommodate the influx of oil workers and people employed in related jobs has hit a wall. Stories last week out of Dickinson and Williston reported vacancy rates of 50 percent. That’s an unsustainable number. The average national vacancy rate is about 30 percent, and it’s far less in cities like Fargo, where the economy is resilient because of diversification.
The other clamp in the hotel industry’s price vice is necessarily reduced room rates caused by collapsing demand. Unless demand recovers quickly (unlikely in light of oil price projections), hotel operators will close doors.
The dark side of a slowing oil economy cannot be denied, no matter the spin from local chambers of commerce and other boosters. But the slowdown is not a bust. Williston, for example, is settling into what honest officials there call a “new normal.” The pace of development has relaxed but not stopped. Many private and public projects planned before the oil price decline might have been modified, but have not been scrapped. The unemployment rate is still among the lowest in the nation, although the mix of job opportunities has changed somewhat.
Dickinson might not be feeling the oil slowdown as intensely as Bakken-centered Williston. Dickinson’s economy is more diversified, and the city has capitalized on its location on busy Interstate 94 as the gateway to North Dakota’s Badlands and Theodore Roosevelt National Park.
The economic sky is not falling in western North Dakota, but there are clouds that cannot be dismissed. Oil country cities are adjusting to Williston’s “new normal,” and finding that managing a decline that could last a while is difficult but doable. That’s good leadership.
Meanwhile, much lower prices at fuel pumps are, in effect, giving consumers a hefty tax cut. It means millions of dollars that otherwise would be flowing to Oklahoma, Texas and New York are staying in North Dakota and circulating in the state’s economy. That’s good news.
Forum editorials represent the opinion of Forum management and the newspaper’s Editorial Board.