OPEC Limiting Oil Production Could Have Positive Impact On OK

It has become a pretty common site here in Oklahoma: Oil derricks and pumps, just sitting unused because of a surplus of oil.

Now the Organization of the Petroleum Exporting Countries, or OPEC, has agreed to cut production by about 700,000 barrels per day to about 32.5 million barrels. 

"I do think over time we're going to see prices of oil start to edge up and by the end of 2017, it's my expectation that they're going to be in the $55 to $60 per barrel range,” said Steve Agee, Dean of Meinders School of Business at OKC University.

Fifty-five to sixty dollars per barrel is the spot where experts say oil companies can make money and the economy can grow, but consumers won’t feel too much pain at the pump.  It will also help boost the state’s coffers.

“It's going to impact positively revenue resources to the state.” Agee said, “So gross production tax revenues will go up. Income taxes will go up because of the higher revenue that will be generated by the higher prices."

State Finance Secretary Preston Doerflinger agreed.

"If the agreement does stay in place when they come back in November I think it has positive implications for both shale producers in our state and ergo our state coffers,” said Doerflinger.

That is, if the agreement stays in place. Traditionally, OPEC has a history of not sticking to quotas. So Doerflinger said it’s important to continue reducing tax breaks and spending and learning from past mistakes.

"I think we are learning right now and I think that we are putting some things in place. Have we done enough? No,” said Doerflinger.

Because of the large oil reserves the US has right now, even with an agreement, there probably won’t be much of an impact on next year’s state budget. In other words; either way next year is going to be a tough budget year.