Local taxing entities will be watching the price of oil a little more closely the next few weeks.
On Wednesday, oil prices reached their highest mark since mid-October. Benchmark U.S. crude rose $1.28, or 2.6 percent, to $50.72 a barrel in New York after it jumped 9.3 percent Wednesday. Brent crude, the standard for pricing international oils, added $1.39, or 2.7 percent, to $53.23 a barrel in London.
The price of oil soared Wednesday after members of OPEC, which collectively produce more than one-third of the world’s oil, agreed to cut production starting in January. The price of oil mostly traded between $40 and $50 a barrel since early April. It dipped as low as $26 a barrel in February.
Scurry County Chief Appraiser Larry Crooks said with oil hitting the $50 mark — and with many forecasters saying it could maintain that level — local taxing entities could see an increase in mineral values next year. But Crooks said it is too early to tell what can happen.
“If the price of oil is at 50 bucks and becomes stable, it will have a bearing on mineral values,” Crooks said. “If (the average price) comes in around 50 bucks, it could be a substantial gain for our taxing entities.”
The Energy Information Administration (EIA) determines the average price of oil for the state. That figure is used by appraisal districts to help determine mineral values.
In 2015, the average price of oil was $54.58 when determining values while this year it was $38.54. EIA sets the average price during the first quarter of the year.
Most Scurry County taxing entities saw mineral values plummet in 2016 because of the average oil price. Ira ISD lost more than 42 percent in mineral values compared to a year ago.
Crooks said with oil prices hitting $50, it could lead to more oilfield activity.
“Anytime there is a price increase, it usually encourages those in the industry to spend a little more money and get active,” he said.
After years of inaction, OPEC agreed Wednesday to cut its oil output for the first time since 2008. The move effectively scraps its strategy of squeezing out U.S. competition through high production. That results in lower prices and strained the cartel’s own economies.
The announced reduction of 1.2 million barrels a day is significant, leaving OPEC’s daily output at 32.5 million barrels. OPEC President Mohammed Bin Saleh Al-Sada said non-OPEC nations are expected to cut production by an additional 600,000 barrels a day.
The combined cuts will result, at least in the short term, in higher oil prices — and, by extension, car fuel, heating and electricity.
Experts say prices could hover around $50 per barrel, but they do not expect prices near $100 a barrel, last seen two years ago. That’s partly due to the fact that President-elect Donald Trump has promised to free up more land for drilling in the U.S., which would increase global supply.
Demand is also not recovering as the world economy sags.
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