The head of the Utah Petroleum Association said the recent rapid rise in gas prices is not likely to stimulate new calls for development of oil shale projects as happened during the 1973-73 oil crisis.
Jim Peacock said long-term price stability in a range that makes oil shale or tar sands development economically attractive is needed before oil companies will seriously consider the option. Utah's Uintah Basin was one targeted area for oil shale and tar sand development during the 1970s.Peacock told the Utah Energy Conservation and Development Council that oil prices remain much too volatile, given the Persian Gulf crisis, to make such options attractive.
State Sen. Carl Swan, a council member, said he believes there needs to be a mechanism to stimulate such interest before oil and gas prices reach a crisis situation.
"I think oil prices have been artificially low this past decade," Swan said. "There is a need for a national fuel policy, but it will probably require higher prices."
Jeff Burks, an analyst for the Utah Energy Office, said the era of cheap oil is probably gone even though world oil supply levels do not justify the recent price increases. He said of the 4.3 million barrels per day lost in the initial boycott of Iraq, some 3.7 million have been made up by increased production by other countries. With the conservation measures that traditionally follow price increase, it is unlikely that there will be any significant shortages in the world supply in the near future, he said.
Burks said prices on Utah oil went from $28 per barrel to $41 for a brief time following the Iraqi invasion, the first time Utah oil ever crossed the $40 barrier. He said local prices are now running about $31 per barrel and he is encouraged by the price drop. He said local oil supplies are stable, but are vulnerable. He noted that local gas stocks dropped dangerously low in September but have since increased substantially.
Although demand has dropped somewhat because of the price increase, Burks said he does not expect to see prices drop. He said consumer reaction forced oil companies to hold the line on price increases and the full impact of the per barrel cost never reached the gas pump. He said prices are likely to remain near their current levels for sometime as oil companies recover costs.
And, Burks said the gas tax hike included in the new budget will not likely affect demand. He said traditionally, consumer demand in Utah has not been affected by gas tax increases.