Anyone paying attention knows the story of the rise of oil in the ND economy. It is well documented both here and elsewhere. I think the most important question to address and possibly answer right now is about the near future. Let’s start with a brief look at the history of the oil in ND.
Oil Prices and Production History
The price and production decisions created large contributions to the state economy over the last decade plus. When looking at prices though it is important to explicitly recognize the outside impacts on North Dakota oil prices. To give a little expanded perspective I include the Brent crude prices which are more of a global benchmark.
As we can see the two series move very closely. The moments of deviation of the two are perhaps the most interesting. It really shows that the global prices are distinct and dictate some of what happens with shale oil.
The oil production expansion really only starts after 2010 after the initial price spike and collapse brought players into the space and then the operational lag was overcome with the sustained price increase. Despite the price volatility output expanded, dropped a bit, but is back in an expansionary phase given the price level.
What this means for the state is pretty vital. Oil ushered in population change, a form of economic diversity though it is all commodity based still, and a change in the fiscal situation for the state among many other changes. As the current policy regime impacted agricultural producers aspects and regions of the state economy received some measure of insulation due to the demands of the energy sector.
Can this continue?
This expansion can continue, but it is time to look broader. Policy needs to look to leverage the commodity sector performance into an array of other activities. This can include processing of products, light manufacturing, and other related industries. The oil output is as a windfall gain and needs to be exploited to its fullest. However, the windfall is not just financial. It includes demographic changes, and those are more likely to be lost if we fail to act soon on those changes.