It's hovered around the magical number of $20 a barrel for more than two weeks now, but oil companies aren't ready yet to pick up drilling in Utah.
The $20-$22 per barrel has been forwarded as the range to entice energy companies to step up their domestic exploration in Utah and other states.On Wednesday, West Texas Intermediate - the benchmark U.S. crude for immediate delivery - gained 30 cents to $20.10 a barrel. But, experts say it's too early to say whether the recent surge in world oil prices has had the positive psychological impact on the industry predicted to ignite exploration.
"The general feeling is that that level of pricing would be a positive influence to start domestic production, but that price range would have to be maintained for a while" to persuade oil companies to drill on their home turf, said Jim Peacock, executive director of the Utah Petroleum Association.
To date, four new drilling rigs are working in the state - a far cry from 30 or more exploring for oil before world oil prices plunged in 1986, making it unprofitable to explore in Utah and many other parts of the country where production costs are higher than overseas.
"This (higher oil prices) doesn't appear to be having a great effect on permitting for additional wells," said Ron Firth, associate director of the state's Division of Oil, Gas and Mining.
Peacock explained that even if oil prices did remain in the $20 range for several months, the impact of that development may not be seen for a year or more as oil companies jump through the hoops of leasing, permitting and drilling.
Other factors also come into play, such as environmental regulations and severance taxes on production. Utah officials have been working with federal landlords to streamline regulations and the permitting process. Meanwhile, the state is also negotiating with the Ute Indian tribe on a cooperative tax on oil production within the reservation.
It's still uncertain how long crude oil prices will stay at the $20 per barrel level. The recent price surge has been due to an explosion on a Shell Oil Co. platform in the North Sea. On Wednesday, Shell announced that repairs of the platform, which delivers 472,000 barrels of crude daily, would take a week longer than planned, sending the price of West Texas Intermediate crude up 30 cents a barrel.
Production quotas by the Organization of Petroleum Exporting Countries have also played a major part in rising oil prices. King Fahd of Saudi Arabia was quoted Wednesday as predicting that oil prices could jump more than $6 a barrel, to $26, by early 1990 if OPEC members adhered to the cartel's supply ceiling.