U.S. oil dropped below $30 a barrel during trading Tuesday. That’s the lowest price since December 2003.
The dip in price happened on the same day Washington state held a public hearing about a proposed oil terminal at the Port of Vancouver.
Oil was more than $100 per barrel when the Vancouver Energy Project was first announced back in the summer of 2013.
Still, backers of the oil terminal said the joint venture, between oil company Tesoro Corp. and logistics firm Savage Industries, is insulated from current market conditions.
“This is a long-term project and not based on specific activity today,” Tina Barbee, a spokeswoman with Tesoro Corp., wrote in an email. “There is always a cyclical nature in commodity markets.”
Still, energy analysts said with lower prices and a global glut of oil, they’re seeing fewer infrastructure projects than in years past.
“When people were starting to set their budgets, even as early as last fall for their capital expenditures for the coming year — and really almost out two years — people were already cutting back,” said Phyllis Nystrom, director of brokerage services at CHS Hedging.
“Even when (oil prices) were at $60, people were starting to second-guess what they were going to spend,” she said.
On Wednesday, the Energy Information Administration projected that crude oil prices would remain low for the next two years. The federal agency, which researches the energy industry, said crude oil would average $40 per barrel in 2016 and increase to an average of $50 per barrel in 2017.
If built, the project in Vancouver could handle 360,000 barrels of crude daily and would be the largest terminal of its kind in the country.
Crude oil would arrive at the port by train from the Bakken region of Montana and North Dakota. From there, it would be transferred into holding tanks and eventually pumped onto ships bound for refineries along the West Coast.
Lower prices means fewer projects
Despite the dramatic drop in oil prices, energy industry experts agree every company has their own sense of what will make a project work financially.
Jenna Delaney, senior energy analyst with Platts Analytics in Houston, said just a few years ago there was growth in domestic oil production, which many expected to continue.
Along with that growth, she said, came infrastructure projects.
“Now, we’re starting to see production tapering off, not only not growing, but the potential for some decline in the near future,” Delaney said. “That definitely has to be factored in by a company that would be building out infrastructure.”
Not surprisingly, oil companies are making significantly less money than just a few years ago. Both Royal Dutch Shell and Chevron have announced layoffs and scaled back plans for new oil exploration.
American households are expected to spend about $1,523 on gas this year, some $900 less than they did in 2014, according to the EIA.
Project Keeps West Coast Focus, Backer Say
Congress just passed a measure that lifts the ban on exporting crude oil out of the United States.
Environmental groups and opponents of the proposed oil terminal in Vancouver point to that as a major concern. They argue the terminal will be used to export crude from the Bakken region to overseas markets.
But company officials say that’s not part of their plan.
Jared Larrabee, general manager of the Vancouver Energy Project, said even though the ban on exporting crude oil has been lifted it doesn’t change the scope of his project.
“There is still no, or very limited, outlet for our domestic and North American crude to make it to the West Coast,” he said. “There’s very limited pipeline access, so there’s still a need on the West coast. And demand for transportation fuels on the West Coast continues to grow.”
Washington’s Energy Facility Site Evaluation Council has one final hearing scheduled on the proposed terminal Thursday in Spokane.
The council is taking public comment on the project through Jan. 22.
Ultimately, the energy council will make a recommendation to Gov. Jay Inslee, who will decide whether or not the project gets permitted.