The North shall rise again

For a while there it looked like I might have to eat my words from last week’s column.

That was the one where I said a world-wide economic boom is likely to follow the pandemic crash — eventually. But my heart skipped a beat when I saw that some major banks were turning against Arctic oil investments to strike a blow against global warming.

Their thinking was that burning oil generates carbon dioxide that is absorbed by the oceans and accelerates global warming. That is a fact and the world eventually needs to get beyond burning oil, but the change won’t happen overnight. It could take a generation or more. Turning against Arctic oil now just seems like an unworthy gesture to placate environmental extremists who don’t want any development in the Far North.

I asked oil analyst Larry Persily if the banks’ move would hurt Alaska exploration and production. He said “no” because major companies like Exxon and ConocoPhillips generally self-finance and aren’t dependent on bank loans.

Then there is Hilcorp, a large independent that was working on a deal to buy BP’s Alaska interests and does borrow from banks. The deal promised to provide jobs and oil income for the state for many years.

Then some of the major lenders gave Hilcorp a raspberry rating, suggesting it couldn’t handle the BP Alaska buyout. That seemed to jeopardize the deal.

Persily said the bankers’ concerns could probably be accommodated if BP was willing to renew discussions and accept a smaller price for its Alaska properties. The price it was asking was $5.6 billion. Reducing the ask may be what is necessary if BP wants to unload its operation here and focus investments elsewhere in the world.

And it wasn’t all major lenders who are red-lining Arctic investments. It seems likely that Hilcorp will be able to find lenders willing to back good projects in the Far North. Alaska is well past its peak production but we still have a lot of oil and gas in the ground.

We should be producing substantial volumes of oil for years and haven’t even begun to tap our huge gas reserves.

Since the world is quite likely to move into electric vehicles in a big way, our gas could be used to power the generators that will charge batteries for electric automobiles. That could provide vital support for Alaska’s economy.

Then came the pandemic and a worldwide hunkering down that has dropped travel and oil consumption to levels not seen in modern times. The price of oil crashed and for a time was in negative territory, suggesting the producers and refiners would pay to have it hauled away.

Few people actually went to service stations expecting to be paid for filling up, but the psychological impact of the price drop was devastating. Oil stocks sank to unprecedented low values.

Some are speculating that because Hilcorp owner Jeffrey Hildebrand’s $2.5 billion net worth dropped by half in the stock market debacle that he wouldn’t be able to pull off the BP Alaska deal.

Though Hildebrand is probably nervous, his drop in value was just a reflection of what is happening throughout the world markets. Right now with many businesses closed, the airlines canceling flights and few people traveling, the entire economy is hurting.

The current economic problem will end eventually and stock values will rise.

The world will be a different place and many changes will be in the works, but oil and gas seem certain to be vital fuels for decades to come. Eventually the world economy will rebound from this year’s crash. And that is when Alaska will get back to something like normal.

After the Civil War they used to say “the South shall rise again.” And we can now say, even though there may be some tough times ahead, the North shall rise again.