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Oil, gasoline prices rise

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Oil prices have continued to surge over the past few weeks, likely boosting energy company cash flow and possibly affecting forecasts for the rest of the year.

After a sharp decline in late 2018, domestic benchmark West Texas Intermediate crude has soared so far in 2019. The price closed Tuesday at $66.30 a barrel, up 56 percent from a recent low of $42.53 set on Christmas Eve. The price dipped a bit over the past two days, closing Thursday at $65.21.

In some ways, the price rise is likely to have little immediate effect on oil company plans. Executives over the past few years have said they are focused on reducing costs and operating within cash flow and no longer have a goal of increasing production at all cost. Because of that relatively new focus, companies have set modest budgets that allow for price fluctuations and have been slow to increase drilling with higher prices.

Most companies also have sales contracts that minimize the effect of price fluctuations. Those hedges are designed to ensure a minimum cash flow, but could hurt reported profits as companies must record a non-cash accounting charge if their hedged sales are lower than market prices.

Still, higher-than-expected sales prices lead to increased cash flow, which gives executives and directors more options, especially if prices remain strong over the next few quarters. They also allow companies to lock in future production at higher prices.

We should find out more next week as executives from Oklahoma City's publicly traded oil producers begin announcing their first quarter earnings and provide more insight on their expectations for the rest of the year.

While higher commodity prices benefit local companies, they also also boost state and local tax collections, especially since the Legislature last year raised the gross production tax, increasing the state's reliance on oil and natural gas sales.

Consumers, however, already have seen their costs rise in part because of the climb in oil prices.

The average price for a gallon of regular gasoline in Oklahoma City was slightly more than $2.61 on Thursday, up 2.4 cents over the past week and 21 cents more than one month ago, according to AAA. The price is 11 cents more than one year ago.

Nationwide, Thursday's average price was almost $2.88 a gallon, up 4 cents over the past week and 25 cents more than one month ago. The price is up almost 9 cents from one year ago.

Adam Wilmoth

Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector.... Read more ›

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