So there is so much to write about right now but I will focus on a brief discussion of the oil war and impacts for North Dakota. The half-life of information right now is so short that any writing is subject to be invalidated by the time it is first read. Oil is obviously important to the state budget revenues, but how important is not entirely clear.
There is some variability over time with the relationship and the Bakken production approach makes the price-production dynamic a bit different than what we see in other countries. Why is the war happening at all? It seems like Saudi Arabia and Russia are at odds over the future direction of policy and there is a dispute for the overall control for OPEC.
OPEC has not worked well for a time, but is particularly problematic right now. Saudi Arabia is not willing to the whole source of market discipline for the cartel now and will open the valves to pressure all the other members. Russia thinks the US shale producers are staying in the market due to efforts to raise oil prices. (Just to be clear, both countries can be correct).
It is clear the oil is important to the budget, but how important now is an issue to be decided. I will be conducting more formal analysis in the next weeks.
The interesting thing here are the various peaks in the tax revenues and the fact that there is some correlation with the North Dakota oil prices. The correlation seems higher after 2015, which would make sense for an industry coming of age at that time. The industry in North Dakota would be beyond the initial startup phase.
What is next is to forecast some of the tax connections and the mechanisms that drive this relationships need to be made explicit. I assume some of this will come out on the radio tomorrow along with virus questions.
