It’s over. The long, painful oil bust - which rivaled the bust of the 1980s - is over, according to the best measure of the issue, the Texas Petro Index.
“Upstream oil and gas activity in Texas ended a punishing 24-month-long economic contraction in December, according to the Texas Petro Index (TPI) released today,” reports the Texas Petroleum Institute. “It is the first monthly increase since peaking at a record 313.5 in November 2014. The TPI improved to 150.6 in December up from 148.0 in November, but still down 21.1 percent from 190.9 in December 2015.”
What’s the Texas Petro Index? It’s a way of measuring oil and gas activity. It factors in everything from rig count to drilling activity to the price of crude and natural gas. It’s an extremely useful indicator, particularly in Texas, which is still an energy state, though economic diversification in recent decades helped shield us from the kind of recession the last oil bust brought on.
“This is the moment we’ve been waiting for,” said Karr Ingham, the economist who created the TPI and updates it monthly. “It is good news for the industry, for the Texas economy, and for many communities around the state that are strongly connected to the oil and gas exploration and production industry.”
That includes East Texas.
“It’s been a bloodbath, frankly, but better days are ahead in 2017 after two years of sharp contraction, job losses, and downward pressure on the statewide and regional economies of Texas,” Ingham said.
How bad did it get?
In December, the TPI was at half the level it was at two years ago.
“Monthly average posted crude oil prices in Texas fell from $101.68 per barrel in June 2014 to $27.08 in February 2016, a decline of 73 percent,” the Institute reports. “The average monthly price of natural gas fell from more than $4.50 per thousand cubic feet in June 2014 to $1.63 in March 2016, a decline of 64 percent.”
Rig count was reduced drastically during the bust. And that meant jobs.
“The statewide rig count in Texas as reported by Baker Hughes hit 906 in the third week of November 2014 before falling to a weekly low of 173 in May 2016, a decline of more 80 percent,” the Institute says. “Between December 2014 and October 2016, an estimated 103,800 jobs were lost in the upstream sector of the Texas oil and gas industry (subject to future revision), 34 percent of Texans on the payrolls of production, drilling, and well servicing companies.”
Now we can expect the industry to come surging back, Ingham projects.
“By the end of 2016, every indicator that makes up the TPI had turned the corner, with the exception of natural gas production and the number of oil and gas wells completed,” he said. “The industry is moving into the new year with a sense of optimism and resurgence for the first time in three years.”
That’s great news for East Texas. Better days are ahead.