North Dakota economy affected by oil slump in all areas

With the average gasoline prices in North Dakota currently hovering around $1.80 a gallon range many residents of the state are rejoicing as prices have not been this low since early in 2009.

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Posted on 1/23/16

By Melissa Anderson

There are numerous factors for the low prices that stretch far beyond North Dakota and the United States, but the impact it has on the agricultural sector has been noticed.

Beyond the obvious benefit of lowered gas prices, the cost of commodities are likely to decrease as well. But this may actually not be a good thing for the state as a whole as the weakened fertilizer markets are being caused by low crop prices. Near record-breaking harvests across the midwest and the nation have driven down prices for many of the top earning commodities.

Many departments at the state capitol, such as the North Dakota Department of Agriculture, are monitoring the slump  in oil prices just as avidly as the North Dakota Department of Mineral Resources.

“There are many direct and indirect benefits and challenges,” North Dakota Agricultural Commissioner Doug Goehring said.

The flooded oil and natural gas market should cause decreased costs and make petroleum and natural gas based products used by agriculture such as chemical and fertilizer decrease in cost as an indirect benefit but it has not had a significant impact.

“Even though those are petroleum-based products, I’m amazed at the lack of correlation,” Goehring stated.

The chemical and fertilizer markets are seeing projected costs at lower levels than in 2015 but still higher than in years prior as the suppliers charge what the market will bear.

“We figure they should be less, but they don’t feel like they are less,” Goehring said.

Operating costs, specifically for fuel, is one aspect that will have an impact on the agricultural sector heading into spring, but Goehring is not so sure that it will be significant enough to help the industry.

“It’s a smaller piece, but when you think about overall cost of operating in the field and trucking, it could be as much as 11 or 12 percent of our operating budget,” Goehring explained.

Some of the most common fertilizer, nitrogenous – which includes ammonia, urea, and ammonium nitrate types, are made  from components of natural gas. The increased production of natural gas is dependent on demand which has fluctuated over the years due to mild winters and economic growth.

The other main fertilizer types are phosphorous and potassium, both of which are mined and processed, making the price of fuel both a direct and indirect factor in their costs.

Typically, fertilizer consumption and crude oil consumption are both closely related to the health of the global economy and wealth, hence subject to similar demand shifts at the global level.

In Cavalier County, fertilizer prices have seen a decrease, but area suppliers feel that is probably a result of both commodity prices and oil.

“The price of oil could very likely be part of it, but it’s not the whole works,” Todd Christianson, Crop Advisor at Simplot, said.

The agricultural community is not the only one being hit this year by the decrease in oil productivity. The entire state of North Dakota is seeing an economic downturn as the boom subsides and those who came to ride the wave begin to leave.

While the North Dakota oil patch watches with baited breath, those not in oil country or at the mercy of market prices will enjoy cheap gasoline as prices are expected to stay under $3 per gallon, most likely hovering around the $2.45 mark for most of 2016.

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