THE OTHER SIDE OF THE COIN – AT 11:08 A.M. ET:  We have cheered in recent years as North Dakota went through an oil boom, contributing mightily to making America energy-independent, and helping to drive down prices at the pump.

Trouble is, we're now seeing the other side of high oil production.  Prices are becoming too low to sustain the boom and the state's revenue base.  From Fox: 

North Dakota lawmakers are now expecting billions less in tax revenue during the next two and a half years.

Blame falling oil prices.

A report from Legislative Council downgrading revenue projections by $5.5 billion points mostly to the impact of oil tax exemptions the Legislature previously failed to reform.

During the 2013 legislative session multiple bills to eliminate the exemptions in exchange for lower top rates were rejected. Now plunging oil prices are expected to invoke those triggers causing a multi-billion swing in the state's expected revenues.

In early January, lawmakers began their 2015 session under what was described as a "black cloud" of oil price concerns. Now a projection released by lawmakers Thursday expects the state to lose $680 million in income and sales tax revenue between now and June 30, 2017.

North Dakota likely will lose another $4.8 billion in oil and gas tax revenue during that same period.

The impact on the state's finances could be dramatic.

COMMENT:  There are reports of oil-exploration companies in serious financial trouble because their return, due to low prices, is too small to warrant exploration.

Don't expect any help from Barack Obama or the Beverly Hills environmentalists who despise the oil industry.  But we must find a way to balance our need for independence-producing production against the desirability of low prices at the pump.  This won't be easy, but creating the oil boom wasn't easy either.  It was fought bitterly by the ideological left.   

In making adjustments we must be wary of those who want to kill the boom, who don't want us energy-independent, and who have substantial resources to pursue their ways.  That includes foreign interests like Saudi Arabia, which depends on America's need for foreign petroleum. 

I'd imagine that, if production slows in North Dakota due to lower prices, the result will be a tightening of the supply, which in turn should lead to somewhat higher gasoline prices.  That in turn will lead to an increase in production and exploration.  The market might just sort this out.

January 31, 2015