Analysis by Energy Workforce President Tim Tarpley
The conflict between Israel and Iran continues into its second week with significant implications for the oil and gas sector. WTI had been as low as $60 a barrel as recently as May 30 but is now trading in the mid-$70s. It is unclear how long or how high prices will go; much of that will be determined by how long the conflict lasts and, more importantly, if and when there is a disruption in the Strait of Hormuz. Nearly 20% of the world’s oil travels through the Strait, which is only 21 miles across and is flanked by Iran and Oman on either side. While there is some pipeline capacity to divert around the straight, most of the volume coming out of that region has to go through it. Should Iran attempt to block or disrupt this passage, we could see some very significant price increases.
Another significant factor will be the duration of the hostilities. The last time Iran and Israel were in a scenario like this, it only lasted a few days, and prices quickly retreated once things cooled down. This scenario seems different. There appears to be a strong chance of additional US involvement or even the potential for regime change in Iran. Either of these scenarios could signal a larger, more destabilizing conflict in the Middle East, which could have significant impacts on the price of oil and the oil industry as a whole.
Texas Comptroller Releases Guidance After Westmorland Decision Delaying Implementation of Tax on Frac Sand Until October 1
Last week, Glenn Hegar, Texas Comptroller of Public Accounts, released a Memorandum detailing the office’s planned new policy to tax processed sand used in the well stimulation process as tangible personal property. As per the memo, it is the position of the Comptroller that, due to the decision in Westmoreland, sand, dirt, gravel and other solid materials are considered processed materials when extracted from the earth in a way that causes a chemical or physical change to those materials. This means that the sale of these materials will be subject to a sales tax. The memo argues that frac sand is processed by washing, sorting, and drying into round and uniform shapes, so the Comptroller will presume that frac sand is a sale of processed material and subject to sales and use tax.
The memo further details that the plan is to apply the determinations prospectively beginning October 1. Energy Workforce and many in the industry believe that this perspective may be taking too broad a view based on the facts of the Westmoreland case, and the Well Stimulation and Legal committees will be working on a strategy to encourage the Comptroller to reevaluate this analysis before the new policy takes effect in October.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
