PERMIAN BASIN (YourBasin) – At the turn of a new year the Permian Basin was filled with oil rigs at over 400. Now stand only 175. A dramatic decrease which along with the COVID-19 outbreak has collapsed the Basin economy.
“And that’s what really drives the growth of our area. So because of that fall in the drilling rig count you’re going to see job loss and you’re going to see loss to the overall economic footprint of the energy industry,” says Mickey Cargile of Cargile Investment Management.
According to a report from The Perryman Group, the projections indicate a loss of $14.1 billion in gross output and 35,400 jobs within the Basin alone.
After the price of oil dipping into the red, -$37.63, prices have flipped since then. According to bloomberg.com, today oil is at $32.50.
Though for Cargile he continues to see things getting worse before they get better.
“Over the next two months I would expect to see continued layoffs, continued early retirements, and also as we watch sales tax revenue for are communities we are going to see those fall as well,” says Cargile.
On a broader spectrum, Texas is projected to lose $133.8 billion in gross output and 861,000 jobs according to the Perryman Group report.
‘Energy is about ten percent of the state’s overall income. So it is a very big impact. It is a very important revenue source for the state,” says Cargile.
According to the Perryman Group report, the Basin alone contributes $163.8 billion in gross product and 1.4 million jobs.
As Governor Greg Abbott works to safely reopen Texas and get the economy going demand has gone up for gas.
“We’re already seeing increases in gasoline demand and those are the types of things that will stabilize oil prices and allow more people to get back to work in our area,” says Cargile.
For Cargile, he says the real issue is when can more jobs be created and when can people get back to work who want to go. That won’t happen while the number of rigs decreases.
“Until you see that drilling rig count stabilize for four weeks you are going to continue to see job loss,” says Cargile.
Though with tremendous projected losses 2021 calls for growth but not at the levels we experienced before the drop in oil prices and the pandemic.
While getting the economy back a more serviceable level is expected before reaching the levels for oil in the Basin, which can be a few years.