EDITOR’S COLUMN: It’s time to face a hard truth, Alaska

Monday morning I rolled out of bed excited at the prospect of attending the Anchorage Chamber of Commerce’s ‘Make it Monday’ luncheon with guest speaker Mark Finley, General Manager, Global Energy Markets and U.S. Economics at British Petroleum, who was on tap to discuss BP’s statistical review of world energy.

Much to my chagrin, when I went to RSVP, the website said it was canceled because one of Mr. Finley’s connecting flights was canceled.

First DMX, now this?

To be fair, however, what I was going to write about what Mr. Finley was going to say about the future of energy prices was going to be anything but fair.

Before coming to Alaska I worked for just over a year in Williston, North Dakota — ground zero of the shale oil boom… and bust.

I’ve seen this traveling B.S. act a time or 10 before.

Periodically, the Chamber of Commerce, or the Bakken Backers, or some other group would put on a midday event in the ballroom of the Grand Williston Hotel and Conference Center. The guest of honor was invariably a soothsayer with a list of credentials as long as Finley’s, who’d proceed to peer into a crystal ball — all the while pointing out the caveat that there is no such thing as a crystal ball when it comes to inelastic (or is oil elastic? I forget) commodities.

However, (pregnant pause), there are trends we can look at that can give us some idea of where the market forces are headed, the speaker would invariably say, and then start putting various forms of line graphs on the overhead and points to instability in Venezuela, or the short-sightedness of the Saudi’s strategy to flood the market, or growing demand for cars in the developing world, and decides that sometime in the middle of 2019, oil prices would hit and stay at $80 a barrel.

By the time everyone was done with their cheesecake, the general takeaway — and the headline in the following day’s Williston Herald — was always some form of: ‘Relief on its way, but not right away, expert says’

Any false prophet worth his frequent flyer miles knows you’ve gotta give the people hope so they’ll invite you back for more cheesecake, but to not promise deliverance so soon as to ruin your chance at repeat business.

Maybe I’d have been proven wrong by Mr. Finley, but I doubt it. We probably all would’ve left the Deni’ana Center feelin’ hopeful about oil prices coming back up soon and saving Alaska’s failing economy.

That kind of false hope isn’t such a big deal in North Dakota, where everybody in the oil game is basically an inveterate gambler — one reason the Bakken is always referred to as an ‘oil play’ — but in Alaska, the consequences of waiting on Quinn the Eskimo to return and lavish the village with revenues is suicide.

Last week, the Alaska State Legislature avoided the seppuku of going off the fiscal cliff by coming up with a budget compromise to keep the government operating.

Nobody got everything they wanted, but that’s kind of the whole point of compromise.

What’s scariest about this scenario, going forward, is that in spite of all this talk of catastrophe, neither side appears to have learned a thing.

Republicans are still betting oil production will come back if we just took the onerous taxes off of drillers, and the Democrats, too, are betting oil prices will come back, and then we’ll tax ‘em to death as we should’ve the first time.

In both approaches there is the fatal assumption that oil prices will come back. But I’ve looked into my crystal ball and I can tell you OIL IS NOT COMING BACK.

Not in Alaska, anyway.

Today, West Texas Intermediate is trading at $45 a barrel after a good Wednesday on the market. Alaska’s breakeven price is approximately $45 per barrel. Compare that to North Dakota where the breakeven price is $24 per barrel, and could probably go lower than that now that the Dakota Access Pipeline is flowing.

That means, even if WTI somehow climbs to $60 a barrel or more, oil companies are just going to put more resources in places they can frack and move product easily. Eyesores like North Dakota and Oklahoma, where no one cares if there’s daily earthquakes or water faucets that catch fire, would, in that event, see some good economic growth. Energy companies would better serve their shareholders if they sought more landlocked shale oil plays in North America and around the world, would they not?

But Alaska?

There’s no logical reason oil companies should have any interest in contending with the remoteness of Prudhoe Bay, the expense of labor, the resistance of environmentalists, the weather, the transportation difficulties, the lack of refineries, and yes, the thirst of a state government that thinks it can feed itself wholly on oil tax revenues.

I suppose that’s the question I would have asked Mr. Finley, but alas, my maw would have been too full of cheesecake and my heart too full of hope to get the words out.