Prices Push Energy Index Higher

Surging energy prices continue to push the Oklahoma Energy Index higher.
The monthly average crude oil price paid to Oklahoma producers topped $100 for the first time in history in April, the most current data available.
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With natural gas prices on the rise as well, the combined result was a total value of Oklahoma crude oil and natural gas production of more than $1.8 billion in April alone.
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The state continues to add working rigs as well, and increases in these important indicators helped to push the Energy Index upward by five full points in April to 249.1, up from 244.1 in March and up nearly 13 percent compared to the April 2007 index of 220.8.
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“Natural gas is what matters in Oklahoma,” said OIPA Chairman John Pilkington, a Tulsa-based independent producer. “For all the talk about crude oil prices and the spotlight rising prices focus on the industry, the lion’s share of exploration and production activity in Oklahoma remains directed to natural gas.”
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Of the $1.8 billion in total oil and gas production value in April, 71 percent is the value of natural gas production. Crude oil pricing, however, matters greatly because of the historical linkage between crude oil and natural gas prices.
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“Increases in crude oil prices typically result in higher natural gas prices,” Pilkington said. “Perhaps more importantly, crude oil price declines typically result in natural gas price declines, and that means crude price trends will have a significant effect on the Oklahoma’s energy economy.”
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Economist Karr Ingham, who compiles the Energy Index, said there is little consensus on the short-term outlook on energy prices. However, he said a decreasing demand for gasoline due to the effects of higher prices could set the stage for a decrease in crude oil prices.

“No one knows what the future holds, but there exists at least the possibility that prices may break and decline in 2008,” Ingham said. “And the price-sensitive oil and natural gas industry in Oklahoma would most certainly be affected to one degree or another.”
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The energy index is a comprehensive measure of the state’s oil and gas production economy established to track industry growth rates and cycles in one of the country’s most active and vibrant energy producing states. The OEI is a joint project of the Oklahoma Independent Petroleum Association (OIPA) and the office of state Secretary of Energy David Fleischaker.



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