Velda Addison, Hart Energy
Oil prices have increased to more than $48/bbl in June since hitting record lows in the $20s in February, but that does not necessarily mean the industry is out of the woods.
The fate of oil and gas jobs in Texas is still of concern given news released this week from the Texas Alliance of Energy Producers (TAEP). Economist Karr Ingham unveiled Texas Petro Index (TPI) indicators that show upstream economic vitality in Texas, which leads the U.S. in oil production, continues to decline.
“Job losses will continue in the coming months, even assuming we've seen the bottom in the price of crude oil,” he said.
His words came as oil and gas companies continued to cope with the global supply-demand imbalance. Production levels have fallen in the U.S., but OPEC nations have continued to pump near record highs. Although the situation appears to have improved in recent months with commodity prices rebounding, companies are still trying to grow profits as they aim to become more efficient and reduce costs.
In a news release, Ingham called it a “minor miracle” that only about 32% of jobs have been cut from a peak of more than 306,000 in December 2014, given drilling activity in Texas has fallen by more than 80%. The cuts are expected to continue.
“According to the TPI, another 6,300 jobs were eliminated in April, leaving upstream petroleum employment at an estimated 207,100, suggesting the loss of nearly 99,000 jobs thus far,” the release said.
Just more than 207,000 Texans remained on upstream oil and gas industry payrolls in April, according to the TPI. That is down 22.4% from April 2015.
Here are the latest TPI highlights as reported by the TAEP in the news release:
- An estimated 105 million barrels of crude and 710.3 billion cubic feet of natural gas were produced in April, down 2.5% and 2.6% respectively from April 2015;
- The rig count was chopped by more than half during the same time frame. Using data from the Baker Hughes rig count, the release said Texas averaged 196 active drilling rigs in April; and
- The number of original drilling permits issued in April also dropped—down 20%.
But crude oil prices have continued to rise, moving from an average of $27.08/bbl in February to more than $48/bbl in June.
“It appears increasingly likely that we have seen the bottom, and that is certainly cause for some celebration and cautious optimism about where we are headed at this point,” Ingham said.
The TPI, which was created by Ingham, is a composite index based on several upstream economic indicators, which include production volumes, prices, rig counts, completions, drilling permits and employment.
Velda Addison can be reached at firstname.lastname@example.org.
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