One of the great concerns we have as we are less than a week away from the November election is what effect will we see on state education revenues. I am often asked what my crystal ball shows when we talk about the potential effect of various revenue sources on school budgets. I believe it is important to take time to look at the factors that affect our long- term data points.
Let’s start with the oil breakevens by shale play. The first graph was produced in November 2017, and the second graph was produced in September 2018. The two graphs show an interesting phenomenon that we can probably expect to see manifest itself over the next ten years. What we see here is:
1. Three out of the five lowest cost production zones are located in Oklahoma.
2. It appears the cost of production is moving lower and doing so quickly.
3. Depth doesn’t appear to be as big an impediment to horizontal drilling activity.
As we transition into March, there are quite a few things that we need to monitor as we move into the next fiscal year. As we have pointed out several times over the past few months, we see a continuing recovery in sales and income taxes and gross production.
This first week of May marks Teacher Appreciation Week, so I hope you will take time to communicate your gratitude for the teachers who have helped shape your life and who are shaping your children's lives.