Oil futures closed well below zero for the first time in history rocking the market– and hurting Louisiana’s economy. With too much crude oil surplus and lack of storage space, costs per barrel keep dropping to close to $20 a barrel as of Monday.
When adjusted for inflation, oil is trading at the lowest price ever, according to a report cited by the Louisiana Oil & Gas Association.
“The crisis facing the industry is impossible to overstate,” LOGA President Gifford Briggs said. “The global demand destruction of oil, caused by the worldwide shutdown of the economy, has sent prices to the lowest in history when adjusted for inflation. There is no magic pill that will save the thousands of jobs that will be lost, but we can immediately take steps to limit the losses.”
LOGA is calling for “severance tax relief, royalty relief, and an end to the government sponsored coastal lawsuits” to help the oil and gas industry.
While Louisiana’s state budget is less dependent on oil than it was before, taxes and royalties from oil and gas production bring roughly $750 million to the state annually.
Three weeks ago LOGA surveyed its 450 members to determine the economic impact of the Russian-Saudi oil war and coronavirus economic shutdown. As many as 16,800 of the 33,650 oil and gas wells operating in Louisiana could be shut down, it found– having significant impact on the industry.
Companies could reduce as much as 70 percent of their workforce over the next three months, according to the survey. These 23,000 jobs generate $2.2 billion in earnings annually.
“Our members are doing everything they can to keep their doors open and protect their workers, whose livelihoods are at risk,” Briggs told the Associated Press. “But if prices don’t recover above $40 barrel by June 1, my members have told me it’s going to be devastating. We cannot do this alone.”