Economist says Texas oil drillers may have unlocked crude supply lasting “decades into the future”

Texas has lost at least 60,000 upstream oil and gas jobs, plus as many as 250,000 supply chain and retail jobs indirectly, as a result of the oil crash, according to an analyst with one of the top industry trade groups in the state.

Karr Ingham, a petroleum economist who compiles the semi-annual Texas Petro Index for the Texas Alliance of Energy Producers, also doesn’t expect those losses to stall in 2016.

The TPI’s estimate of 250,000 job losses in Texas is devised from a multiplier tying upstream oil and gas job cuts to jobs elsewhere in the economy. Ingham said he believes four or five indirect jobs are lost for every upstream job in the state. Other economists put that estimate at six to seven indirect jobs, raising by hundreds of thousands the state’s potential job losses.

But Ingham noted that growth in petrochemical and construction jobs along the Gulf Coast may have helped offset cuts in upstream.

Despite massive cutbacks in the oil field, Texas likely broke the state’s 43-year-old record for crude oil production with an estimated 1.267 billion barrels in 2015, Ingham said Tuesday at the Petroleum Club in downtown Houston.

“If we don’t hit [that record], we’re going to get awfully close to it,” he said.

Ingham said he is a “little worried” that Texas producers have unlocked so much oil supply that prices could stay depressed for years, as has happened with natural gas prices.

“The industry has cracked open an energy supply of crude oil and natural gas literally for decades into the future,” he said.

The state’s crude oil production peaked in March, reaching 3.6 million barrels per day according to the U.S. Energy Information Administration. But production has remained stubbornly high — despite a massive drawdown that has seen hundreds of rigs sidelined in Texas oil fields — because many wells were already drilled and completed.

“We’re now on the course of sustained production decline in Texas,” Ingham said. “But it’s not like it just falls off a cliff.”

Texas dropped from more than 306,000 direct upstream oil and gas jobs down to little more than 246,000 jobs by the end of the year, with more job reductions announced in January.

The last time oil prices hovered near $30 a barrel was in 2003, when Texas had only about 130,000 oil and gas jobs total; Ingham didn’t project job losses to extend that far, but he said a lot more should be expected unless oil prices rebound.

“If prices were to not recover quickly and not rise much higher than they are now for some period of time, then the outlook in terms of overall activity levels and employment, in particular, is fairly dire,” Ingham said. “That’s not an industry that needs as many jobs on the payroll as it has right now.”

Some projections have oil prices climbing in the second half of 2016, but many predictions for the latter half of 2015 promised a similar rise.

“They missed it by a country freakin’ mile,” Ingham said.

 

 

 

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