Lower gas prices have been nice, but they come at a price for the oil and gas workforce. So far in 2015, at least 75,000 jobs have been cut in the industry including oilfield services companies, parts manufacturers, and steel pipe makers. Service companies have borne the brunt of it, with nearly 59,000 layoffs, followed by exploration and production companies and manufacturing companies with more than 10,000 and 7,000 layoffs respectively. In Houston, a high level of uncertainty continues regarding the path of oil prices, the ultimate extent of the ongoing decline in exploration and drilling, and the future of the U.S. fracking industry.
One area benefitting Houston is an unprecedented level of petrochemical and other heavy construction along the Ship Channel. In a report for the Institute for Regional Forecasting, Robert W. Gilmer, Ph.D. and Adam W. Perdue, Ph.D. provide an update on the Economic Outlook of Houston and low oil prices. According to this report, combining the bad news in drilling with the good news in petrochemical expansion averages out so that Houston avoids the mild recession that current low oil prices would otherwise bring, and at worst, we probably face several years of subpar growth. For a more in-depth look at the report, click here.
Even though the U.S. is producing more light sweet crude from shale formations than our refineries know what to do with, we still import about 5 million barrels per day from the rest of the world. The imports are almost entirely of heavier more sour crude that our refineries were optimized for before the shale boom. If American oil companies could export their light crude they could get higher prices for it than what domestic refiners are willing to pay and this would help to improve the economics of American oil. About 40 people lose their job with the every rig that has been shut down and stored in a harbor, shipyard, or designated offshore area, a practice referred to as cold stacked or mothballed. The U.S. rig count is down by more than 700 from this time last year.
- Home to and more than 5,000 energy related firms, Houston is considered by many as the Energy Capital of the world. Houston’s economy has a broad industrial base in the energy, aeronautics, and technology industries: only New York City is home to more Fortune 500 headquarters.
- Natural gas and renewable energy generated more than 40% of U.S. electricity in 2014 and are the source of 93% of new power capacity built in the country since 2000.
- The U.S. power sector is decarbonizing, with the contribution of renewable energy rising from 8.3% to 12.8% in that last several years and the production and consumption of natural gas hitting record highs in 2014. Since 2000, 93% of new power capacity built in the U.S. has come from natural gas and renewables.
- The price of solar photovoltaic panels has declined 99% over the last four decades, from $74 a watt in 1972 to less than 70 cents a watt in 2014.
- U.S. coal use is dropping—it fell 21% between 2007 and 2014—and more than one-third of the nation’s coal plants have already closed or announced plans for future closure in the last five years.