Crude oil prices dipped below $30 per barrel on Tuesday, the lowest they’ve fallen in seven years. The Federal Reserve Bank in Dallas said in response that if prices don’t bounce back quickly, thousands of Texans could find themselves unemployed by the end of this year.
“We’ve been watching this price go down since the end of July last year,” Economist Tim Snyder said. “Since then, we’ve seen prices decline quite a bit, but this year we started off the year at a very, very low price.”
Several large oil companies have already started laying off many of their employees. BP announced they will cut 4,000 oil exploration and production jobs by 2017, and on Tuesday National Oilwell Varco said they plan to lay off 120 employees by the end of the week.
“We will weather our way through this,” Snyder said. “I think it is important to understand that these oil companies saw this coming. Overproduction is not something that just snuck up on us and all of the sudden one day we just dropped the price; it’s been coming.”
Last year, Texas had a job growth rate of 1.3 percent. Experts said oil prices need to climb into the $40 to $50 a barrel range in order to maintain that rate in 2016. However, if that doesn’t happen, Snyder said job growth in the state will turn negative.
“We’re not going to see any growth,” Synder said. “We’re probably going to reduce the number of employees that we have in large companies for a while until this stabilizes, and then we will start to move back up again.”
Snyder said he is hopeful that crude oil prices will bounce back to $70 per barrel “no later than the next 12 to 15 months.”
However oil and gas expert Gary Bennett isn’t as hopeful. Bennett said it will take years for the oil industry to recover from this slump.
“I really would not be surprised if it’s not 2020 to 2023 before we really get a sustained return to the mid-50 oil prices,” Bennett said. “I hope I’m wrong.”
Bennett said the production side of the industry is getting hit the hardest.
It’s devastating for the production side because we can’t drill wells looking for $20 oil,” Bennett said. “I don’t think that this will last that long, but I do think that it is really going to feel miserable.”
Bennett said lower oil prices mean consumers can expect to pay less at the pump this year. He expects gas prices to continue to drop to as low as $1.25 if crude oil prices don’t start climbing back up.
“That’s pretty doggone cheap,” Bennett said. “The rest of the state will benefit from cheaper gasoline, but it will be devastating to producers for quite some while.”
