Economist 'Cautiously Optimistic' on Oil Prices, But Recovery Still Ahead
While crude oil wellhead prices in Texas have been on the upswing, it will take time before the rise in wellhead prices prompts companies to rehire laid off workers.
The staff rosters of drilling and service companies have been hammered by the downturn in oil prices, and the situation will get worse before it improves, Karr Ingham, economist with the Texas Alliance of Energy Producers and creator of the Texas Petro Index (TPI), told Rigzone.
According to the index, crude oil prices hit bottom in February, when West Texas Intermediate (WTI) crude sold for an average $27.08/bbl. On Feb. 11, WTI prices hit a daily low of $22.75/bbl. While there is cause for some celebration and cautious optimism, it will take another five to six months after that until the employment market starts to respond, Ingham noted.
“Companies are generally reticent about cutting employees,” Ingham commented. “Once they do go into that mode, they’re not in a great hurry to hire them back.”
Other TPI indicators of upstream economic vitality in Texas continue to fall. The monthly average of active drilling rigs in April declined to less than 200 for the first time since June 1999 and continued downward in May. The 173-rig count in the last two weeks of May was 81 percent less than the weekly count in November 2014 just prior to the start of the rig count decline, according to a May 31 Texas Alliance of Energy Producers press statement.
Ingham commented that the 32 percent loss of oil and gas-related jobs in Texas – which occurred after upstream petroleum industry employment peaked at over 306,000 jobs in December 2014 – was a ‘minor miracle’ compared with the 80 percent decline in drilling rigs in the state. According to the TPI, another 6,300 jobs were eliminated in April, leaving upstream petroleum employment at an estimated 207,100, suggesting a loss of almost 99,000 jobs thus far.
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