Ingham: Oil, Gas Sector Strong in 2013, Leading to Economic Growth
Oil and gas producers in Texas had one of their best years ever in 2013, according to the Texas Petro Index (TPI) released Wednesday. As the energy industry in Texas continues to put the doldrums of 2009 behind it, the industry is helping to create many new jobs as well.
The TPI, which is a composite index taken from a comprehensive group of upstream economic indicators, peaked at 295 in December. That was the fourth straight month of new record highs. The last high was reached during the period of September to October 2008. Following that peak, the TPI went into a slide that saw the index fall to 188.5 in December 2009 during the severe economic recession before beginning the current growth cycle.
The growth in 2013 was driven by crude oil production, although higher natural gas wellhead prices also lifted the bottom line, according to petroleum economist Karr Ingham, who created and maintains the TPI. It was particularly impressive given that most natural gas was recovered during oil production.
“The statewide upstream oil and gas economy in July finally recovered fully from the nadir of December 2009 and surpassed the previous peak TPI (287.6) achieved in the late fall 2008,” Ingham said. “Although most indicators of industry activity were higher at year-end 2013, compared to the prior year, the story of the year was crude oil production in Texas.”
Growth in over the past two years has been substantial, Ingham said.
“By our estimates, statewide crude oil production grew by about 21 percent in 2013 compared to 2012, which in turn was up more than 34 percent compared to the prior year,” Ingham said. “And those increases are part of a trend that has been underway for several years.”
By the end of 2013, the TPI was up 6.7 compared to one year earlier, despite a 2013 drop in the rig count of 7.1 percent, compared with 2012. In 2013, there were 21,471 drilling permits issued, the Texas Railroad Commission said, compared with the 22,479 permits that were issued in 2012.
A Baker Hughes count of active drilling rigs in Texas showed that 2013 finished strongly, with 843 rigs in operation in December, compared with 838 active drilling rigs for December 2012. Both months were down from the monthly peak in September 2008 of 946 active rigs. The number of active rigs reached a trough of 329 in June 2009.
Production was not the only thing that was up within the oil and gas sector in 2013, Ingham said. More than 276,000 people in Texas were working in the oil and gas production, drilling and service sectors during 2013. That was up about 6.4 percent from the year-earlier figure of about 259,600. There were more people employed in oil and gas in either year than during the previous peak of about 223,000 jobs in November 2008.
Ingham noted that there is a multiplier effect from the creation of oil and gas jobs. While different economists come to different conclusions regarding that size of the multiplier effect, Ingham estimated that for every oil and gas job created, there is a multiplier effect of about 5, meaning that another 4 jobs were created outside of the oil and gas sector. That is higher than in most other industries, since oil and gas jobs pay better than most other jobs.
While the industry expanded in 2013, it would not be unusual if there were a small slowdown in 2014, Ingham cautioned.
“When production increases the way it did, it would not be improbable if the industry pulled back on the reins a bit in 2014,” due in part to cost factors, Ingham said.
However, that the health of the industry overall was very good, and that any easing would likely be small, Ingham added.
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