Louisiana’s oil and gas industry still ailing due to the pandemic
NEW ORLEANS, La. (WVUE) - As Louisiana prepares to reopen its economy on Friday the state’s oil and gas industry welcomes that move. But the Louisiana Oil and Gas Association says more economic progress will be needed outside of the state to help the industry recover.
Gifford Briggs is President of LOGA.
"Anything that gets people moving and driving again and consuming energy and consuming oil and consuming gasoline is a good thing for our industry. We know we need to do it safely. It has to go beyond Louisiana, we need our country, we need the nation, we need, you know globally, we need economies to be moving again,” Briggs said.
Due to the coronavirus pandemic global demand for oil is down.
"The challenges the industry is facing are significant,” continued Briggs.
State government’s budget counts on oil prices being at a certain level but given what is currently happening, the Revenue Estimating Conference this week set the price of a barrel of oil at just over $30 for the new fiscal year.
Greg Albrecht is the legislature’s chief economist.
"Realize the $32.17 oil price for next fiscal year is a change from $60, that's what was in the April 2019 forecast,” said Albrecht.
Briggs said low oil prices have consequences.
"We need a breakeven price of $37 dollars, so if we're at $30 dollars for the next two years that's basically saying the majority of companies if they are producing are going to be losing money and obviously companies are going to have to take steps to try to adjust their expenses if that's the case,” he said.
Higher oil prices give companies confidence to make costly investments said Briggs.
"We started the year off at $60, so we're more than 50 percent off of where we were at the beginning of the year and you know we need strong futures, we need confidence in the market to be able to invest,” Briggs stated.
Still, Albrecht noted that recent jobless claims show some other industries are faring worse than the oil and gas sector in the state.
"So far mining, which is oil and gas extraction for us not as bad as you would think yet, that may rocket up as time goes by,” said Albrecht.
Briggs said part of the reason could be the federal Paycheck Protection Program that went into effect to help companies retain their workers during the pandemic.
"Yeah, I think that's partly because the numbers are delayed and because companies are taking advantage of the PPP program,” he said.
Briggs said some workers were affected before the PPP was implemented.
"Well, in looking at some of Greg's [Albrecht] numbers they indicated about 4,000 to 5,000 people in the mining industry which represents a little over 10 percent of the industry. Our surveys and talking to our members said that number is closer to 23 percent and that could be because they chose not to file for unemployment,” he said.
Briggs said if the PPP is extended for a longer period of time, he expects impacted companies to seize the opportunity to retain workers.
"We know how important their experience is, how important their expertise is and so we're going to do everything possible to maintain our workforce as long as possible. If PPP gets extended, I would expect that many in our industry are going to take advantage of it again,” said Briggs.
Saudi Arabia says it will slash its oil output.
“Well, we saw a little bit of uptick in prices today,” said Briggs. “We’re going to need 30 million barrels of oil, you know, to either be cut from the market or we’re going to have to see growing demand and ideally we see both coming at the same time."
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