Oil Prices Lowest in Decades – What Does That Mean for Us?
For the first time in nearly two decades, the price of oil has dipped below $21.
While the country is dealing with the coronavirus pandemic, Covid-19, the oil and gas industry, and by extension Houma, is facing the additional challenge of plummeting oil. West Texas Intermediate traded as low as $20.80/BBL yesterday, and Brent crude faired little better at $24.52.
“The oil and gas industry is facing a perfect storm,” said Gifford Briggs, President of the Louisiana Oil & Gas Association. “While the COVID-19 pandemic has paralyzed the country and rapidly reduced the demand for energy, Russia and OPEC are ramping up production. This combination of unprecedented events has led many experts to predict that oil prices will remain below $35/BBL for the foreseeable future. These are serious times.”
Russia and OPEC are locked in a game of chicken after negotiations to stabilize oil prices failed March 6 in Vienna. OPEC sought to cut output by 1.5 million barrels per day, and when Russia declined, Saudi Arabia drove prices to the floor in an attempt to hurt Russia’s wallet.
Houma has become caught in this crossfire as the city’s economy is heavily tied to the industry. The oil market had already been in a slow decline, as economist Dr. Loren Scott explained to the Houma Times on March 2.
“Over 16, ‘17, ‘18, and ‘19, you guys lost 17.5% of your jobs – 17.5% drop in your employment is huge,” Scott explained.”That doesn’t happen.”
To put that into perspective, said Scott, “during the Great Recession, the national economy went through, in ‘08, the number of jobs lost was 6.1%.”