For the oil and gas industry, 2016 has been a bit of an unpredictable road of ups and downs. In February, the price of crude fell way down to the mid $20s. Later in June, prices reached a peak over $50. Many hope that the volatility is over and that the industry is beginning to recover. One economist says that this recovery won’t come fast or easily.
Texas Alliance of Energy Producers economist, Karr Ingham, is also the mind behind the Texas Petro Index (TPI). On July 25 in Houston, Ingham revealed TPI’s mid-year findings to reporters. In June, Texas crude prices reached an average of $45.19 a barrel, the fourth straight month of growth since the monthly average price dropped to $27.08 back in February. Ingham said it would be best to not be so optimistic about the mild increase.
“Even with deep declines in activity levels, oil production in Texas has been slow to respond,” said Ingham, “In fact, crude output in Texas this year through June declined only about five percent compared to the first six months of 2015.” Plainly, Texas just isn’t going to fully recover any time soon.
Ingham also said that “virtually nothing in this cycle that would correct the current contraction has occurred quickly or within the time frames that many had forecast. The sharp price decline and resulting industry downturn was the direct result of market imbalance and rising crude oil supplies.” He continued, “Concerns about these very things remain in place, and there is presently no great sense that the difference will be made up on the demand side.” Therefore, according to Ingham, while we may be reaching the end of things in terms of TPI decline, recovery will still most likely be tediously slow.
Article written by HEI contributor Briana Steptoe.