(September 22, 2000) LB City Hall and OPEC have something in common: as the price of oil soars, they smile.
With the price of oil now at record highs, LB City Hall is reaping a revenue windfall from LB's oil properties, feeding the General Fund and Tidelands Funds at levels above those budgeted.
Dennis Sullivan, Director of Department of Oil Properties for the City of Long Beach, confirmed to LBReport.com that when City Hall prepared the 2000-2001 budget several months ago, it conservatively estimated that LB's oil properties might bring $17 a barrel. Today, with the commonly quoted commodity price of oil at roughly $37 per barrel, "Wilmington Crude" (which is pumped from LB oil properties and fetches roughly 80% of the commodity price) goes for about $30 a barrel, Mr. Sullivan said.
The difference between the cautious $17 per barrel level budget estimate and the $30+ per barrel market price now is a windfall for City Hall. (Mr. Sullivan indicated there are some additional costs associated with putting new wells on line as the price increases, but the costs are less than the revenue received.) It also means that even if the price of oil fell back into the $20+ range and remained at that level for the next 12 months, it might still net a significant sum at year's end.
During the September 12 City Council budget deliberations, City Manager Henry Taboada publicly confirmed that the City's General Funds and Tidelands Funds brought in revenue beyond levels budgeted in the just-concluding fiscal year (1999-2000) meaning $1.3 million more for the Tidelands Fund and $1.0 more for the General Fund. (The Council promptly allocated the additional $1.0 million in general fund money for spending, not saving.)
It's unknown (and probably unknowable) for how long the price of oil will remain at its current level and thus it's unknown how much additional oil revenue, if any, City Hall will collect by the budget year's end beyond the level budgeted. But if the price of oil remains above the cautiously budgeted level for an extended period, it seems clear City Hall will realize some net quantum of additional revenue.
Like any commodity, oil prices fluctuate, sometimes with considerable volatility. Mr. Sullivan noted that 18 months ago, the commonly quoted commodity price of oil, now at roughly $37 a barrel, was about $6.50 per barrel.