Oil prices tumbled again Friday, back down below $30 a barrel, after a week of gains along with hopes of an agreement to freeze production.
The global supply remains high while worldwide demand is soft.
West Texas Intermediate prices, the benchmark for U.S. oil fell 3.7% down to $29.64 a barrel.
As prices slump, more and more of the nation’s oil rigs fall silent. Figures released Friday showed drilling activity in the U.S. has fallen to lowest it’s been in close to 17 years. The oil-services firm Baker Hughes reports the number of rigs looking for U.S. oil in the U.S. dropped by 26 rigs this week. That leaves just 413 in operation, drilling onshore and off in the U.S.
Texas lost 12 rigs this week, the state suffered the biggest loss but Texas remains the nation’s top oil producer with a total of 46 rigs.
The latest numbers from the Texas Workforce Commission show between the state’s oil and gas industry cut roughly 59,000 jobs between the third quarter of 2014 to the third quarter of 2015.
Those layoffs resulted the loss of nearly $1.9 billion in wages and some economists estimate another 20,000 jobs will be eliminated in the first half of 2016.
“If we have a crash because there is a lack of demand, that’s not good news either because we’re hearing this dreaded “R” word— recession,” said Ehud Ronn.
An economics professor at the University of Texas-Austin. Ronn specializes in in energy industry finance.
Ronn’s biggest concern is the lack of the demand. He said today’s oil market mirrors the economic climate in 2008, just before the financial crisis.
“Historically we’ve seen some real losses and we’re not seeing that kind of loss or impact,” said Texas Workforce Commissioner Ruth Hughs.
The oil and gas industry has taken a bit hit but overall, the state’s seen an increase in job growth.
“I know that we are going to maintain, so that is the good news in this. Certainly some industries are impacted. It is a big part of our economy but thankfully not the only part of our economy,” Hughs said.
In the same time period that the oil and gas industry cut 59,000 jobs, more than 166,000 jobs were added in other industries.
Construction jobs jumped by 4% while the trade and transportation industries also grew.
“We are in a much better position that we have been in the past because we have diversified our economy is so many ways,” said Hughs.
With a more diverse economy, Texas is less dependent on oil but the industry still accounts for roughly 15% of the state’s economy and there is a trickle effect.
In an interview last month, Texas Comptroller Glenn Hegar said because of low oil prices, the state will hold off on some road construction projects. Cheaper prices at the pump mean Texas will miss out on millions in sales tax revenue. In turn, there will be fewer projects and construction jobs than expected.
Market researches expect crude oil prices will climb back up to the mid-$50 range by this time next year. Ronn said prices will recover much faster than the employment rates around the state’s oil patches.
Prices will likely recover at a much faster rate than companies will rebuild their workforce.
“It will be lagged, it will be tempered it will be regrettably be moderated by the fact that people are still concerned,” Ronn said.
When crude oil prices collapsed in 1986, the state’s unemployment rate skyrocketed to a record 9.2%.
