Oil's fair in revenue
Rich in crude oil, Abilene benefits from the rising prices at the pump-in jobs, royalties and profit
Pete Koehn, Student Reporter
Issue date: 3/28/08 Section: Energy Special
While Abilenians may feel pain from the price of gas at the pump, the simple truth is high gas prices are ultimately good for Abilene. Allan Frizzell, vice president of Enrich Oil Corp., says the quality of life in Abilene is dramatically improved by oil and gas revenue.
Enrich is an independent oil producer based in Abilene that searches for and extracts crude oil. The high price of oil allows companies like Enrich to expand their search and extraction efforts, which in turn, creates more jobs.
"For us the price is good. We can drill prospects that we may not have drilled at a lower price," Frizzell said.
-Present prices pay off-
One thing many people don't realize, Frizzell said, is that many people in Abilene are descendants of oil royalties. The most dramatic example is the Dodge Jones Foundation, established in 1954.
The family sold the surface of their land but retained the mineral rights. With royalties from oil production, the Dodge Jones Foundation is credited with restoring much of Abilene's downtown sector. Dodge Jones is the only reason the Paramount Theatre, the Grace Museum and several other buildings in downtown Abilene are still here, Frizzell said.
The reason for the high prices, Frizzell said, is simply supply and demand. Supply has remained the same for several years, but demand is steadily increasing. Rapidly developing countries like China and India are using more oil than ever, Frizzell said.
Prices at the pump are not based solely on high oil prices. Only about 40 to 45 percent of gas prices come from the price of oil, Frizzell said; the rest of the $3 per gallon is refining, marketing and taxes. Things haven't changed much over the past years, as far as the ratio of costs, Frizzell said.
While high gas prices are good for the Abilene economy, the oil reserves are quickly running dry. The problem with Abilene is that most of its oil fields are mature, Frizzell said. He compares the oil in the area to a cup of coffee. "You can take and take from the cup, but once it's gone, it's gone," Frizzell said.
-Past prosperity-
Through the years, Abilene's prosperity has mirrored the success of oil business. During World War II, oil became an integral part of Abilene's economy.
According to the Abilene Chamber of Commerce, 903 oil fields were discovered within a 75-mile radius of Abilene between the years of 1951 and 1955. Geologists, operators, landmen and service company workers were drawn to the city. Abilene became headquarters for numerous independent operators and many major companies. A growing number of refining plants became established in the area and furthered Abilene's reputation as the oil center of West Central Texas.
The development of oil production in Abilene and the surrounding area has been somewhat of a bumpy ride. Booms and busts in the oil business have made fortunes and dashed them in the same breath. In 1979, there was a big boom, sending oil prices to up around $30 a barrel, Frizzell said. By 1981, prices had dropped to $10 a barrel, putting many investors out of work. Since then, things have remained somewhat calm.
"The city of Abilene has done a good job insulating itself from being dependant on oil," Frizzell said.
This came about partly because of the advent of the Development Corporation of Abilene (DCOA). The DCOA, Frizzell said, is responsible for attracting other businesses to Abilene, giving the city a more diverse platform of economic stability. This is accomplished by the implementation of a halfcent sales tax. With support from Abilene's residents, the DCOA can "find the best way to strengthen its businesses, build a better economic base and create jobs for its residents," according the DCOA Web site.
-Looking ahead-
While the future of the oil and gas can be hard to predict, Harry J. Longwell, director and executive vice president of Exxon Mobil Corp., gives his estimate in an article entitled "The Future of the Oil and Gas Industry: Past Approaches, New Challenges."
According to the article, one of the biggest problems in the oil and gas industry is the decline of supply and the increase of demand.
By the year 2010, demand is expected to rise at a rate of about 2 percent per year for oil and 3 percent per year for gas.
The challenge here, Longwell writes, is to ensure that both new and discovered resources can be produced in an economically and environmentally sound manner and production can meet increasing demand and offset natural field decline.
With Abilene's oil fields approaching a mature state, this proves quite the challenge.
Many look at the future of energy as the decline of oil, and this certainly might be the case. Renewable energy sources, such as hydrogen, wind and solar power, are set to take over as oil production declines. Several big car companies such as Honda and BMW have already begun developing vehicles that run on hydrogen.
While these "cars of the future" might be a ways off, Longwell doesn't hesitate to state his confidence in the future of oil.
"I think it is well within the realm of possibility," Longwell said, "that many of our future discoveries will come not just from new frontier areas, but also from proven areas, as evolving technology improves our ability to virtually 'see' and distinguish the oil and gas before we drill."
E-mail Koehn at: optimist@acu.edu
Enrich is an independent oil producer based in Abilene that searches for and extracts crude oil. The high price of oil allows companies like Enrich to expand their search and extraction efforts, which in turn, creates more jobs.
"For us the price is good. We can drill prospects that we may not have drilled at a lower price," Frizzell said.
-Present prices pay off-
One thing many people don't realize, Frizzell said, is that many people in Abilene are descendants of oil royalties. The most dramatic example is the Dodge Jones Foundation, established in 1954.
The family sold the surface of their land but retained the mineral rights. With royalties from oil production, the Dodge Jones Foundation is credited with restoring much of Abilene's downtown sector. Dodge Jones is the only reason the Paramount Theatre, the Grace Museum and several other buildings in downtown Abilene are still here, Frizzell said.
The reason for the high prices, Frizzell said, is simply supply and demand. Supply has remained the same for several years, but demand is steadily increasing. Rapidly developing countries like China and India are using more oil than ever, Frizzell said.
Prices at the pump are not based solely on high oil prices. Only about 40 to 45 percent of gas prices come from the price of oil, Frizzell said; the rest of the $3 per gallon is refining, marketing and taxes. Things haven't changed much over the past years, as far as the ratio of costs, Frizzell said.
While high gas prices are good for the Abilene economy, the oil reserves are quickly running dry. The problem with Abilene is that most of its oil fields are mature, Frizzell said. He compares the oil in the area to a cup of coffee. "You can take and take from the cup, but once it's gone, it's gone," Frizzell said.
-Past prosperity-
Through the years, Abilene's prosperity has mirrored the success of oil business. During World War II, oil became an integral part of Abilene's economy.
According to the Abilene Chamber of Commerce, 903 oil fields were discovered within a 75-mile radius of Abilene between the years of 1951 and 1955. Geologists, operators, landmen and service company workers were drawn to the city. Abilene became headquarters for numerous independent operators and many major companies. A growing number of refining plants became established in the area and furthered Abilene's reputation as the oil center of West Central Texas.
The development of oil production in Abilene and the surrounding area has been somewhat of a bumpy ride. Booms and busts in the oil business have made fortunes and dashed them in the same breath. In 1979, there was a big boom, sending oil prices to up around $30 a barrel, Frizzell said. By 1981, prices had dropped to $10 a barrel, putting many investors out of work. Since then, things have remained somewhat calm.
"The city of Abilene has done a good job insulating itself from being dependant on oil," Frizzell said.
This came about partly because of the advent of the Development Corporation of Abilene (DCOA). The DCOA, Frizzell said, is responsible for attracting other businesses to Abilene, giving the city a more diverse platform of economic stability. This is accomplished by the implementation of a halfcent sales tax. With support from Abilene's residents, the DCOA can "find the best way to strengthen its businesses, build a better economic base and create jobs for its residents," according the DCOA Web site.
-Looking ahead-
While the future of the oil and gas can be hard to predict, Harry J. Longwell, director and executive vice president of Exxon Mobil Corp., gives his estimate in an article entitled "The Future of the Oil and Gas Industry: Past Approaches, New Challenges."
According to the article, one of the biggest problems in the oil and gas industry is the decline of supply and the increase of demand.
By the year 2010, demand is expected to rise at a rate of about 2 percent per year for oil and 3 percent per year for gas.
The challenge here, Longwell writes, is to ensure that both new and discovered resources can be produced in an economically and environmentally sound manner and production can meet increasing demand and offset natural field decline.
With Abilene's oil fields approaching a mature state, this proves quite the challenge.
Many look at the future of energy as the decline of oil, and this certainly might be the case. Renewable energy sources, such as hydrogen, wind and solar power, are set to take over as oil production declines. Several big car companies such as Honda and BMW have already begun developing vehicles that run on hydrogen.
While these "cars of the future" might be a ways off, Longwell doesn't hesitate to state his confidence in the future of oil.
"I think it is well within the realm of possibility," Longwell said, "that many of our future discoveries will come not just from new frontier areas, but also from proven areas, as evolving technology improves our ability to virtually 'see' and distinguish the oil and gas before we drill."
E-mail Koehn at: optimist@acu.edu
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