Wrapping Up 2019: West Texas Oil Economy in Review

Wrapping Up 2019: West Texas Oil Economy in Review

M&M Sales & Equipment supports our local communities and one way that we do that is by staying informed on the issues that matter to you. We provide products of all kinds including cutting tools like end mills, face mills, grooving inserts and drill bits to various industries, and we have a special relationship with those working in oil and gas. As 2020 kicks off, we wanted to take a look back and reflect on how the oil industry has impacted West Texas residents and beyond over the past year.

Oil Activity in Early 2019

Back in March of 2019, we explored West Texas’ boom-bust oil industry and shared some expert insights on the status of crude oil production and where it was headed. The U.S. Department of Energy expected the Permian Basin to pump 3.9 million barrels of oil per day (bpd), with futures anticipated at 9 million bpd by 2021.

We also shared examples of how the oil boom was impacting West Texas and its residents. Rising employment rates were a welcome relief to many who were impacted by massive layoffs in 2016, but food and housing costs also skyrocketed, hitting those same residents square in the pocketbook. Though market conditions looked good, West Texans are used to the ebb and flow of the oil industry and remain cautious. The old saying, “Oil giveth and oil taketh away” is one that’s always on the minds of those who live here.

Related: 2019 Oil Forecast in West Texas: Boom Expected to Continue

Year End Oil Report

As we continued throughout the year, the outlook remained positive overall. Energy technology company Baker Hughes recently reported an increase of four rigs bringing the active U.S. rig total to 667. Our own Texas rig count remained unchanged from the week prior at 400, but down 132 from 2018.

What’s interesting is that according to the U.S. Energy Information Administration (EIA), the United States exported 90,000 bpd more total crude oil and petroleum in September 2019 than we imported. This marks the first recorded month in U.S. history that the United States exported more crude oil and petroleum products than it imported. This supports the 2019 Annual Energy Outlook that forecast that the U.S. would become a net energy exporter by 2020.

While crude oil production looks healthy, coal consumption continues its decades-long decline.  Reports show that U.S. coal production employment has fallen 42% since 2001 (EIA). That seems to align with the decrease in Texas coal production from over 40 million short tons in 2014 down to roughly 25 million short tons in 2018.

According to the Federal Reserve Bank of Dallas, employment in oil and gas extraction jobs in Texas remain steady around 78,600. The Permian Basin maintains healthy crude oil production numbers of around 4.5 million bpd, meeting and exceeding the U.S. Department of Energy’s prediction earlier in the year. (View 2019 Energy Slideshow here)

Looking Ahead to 2020

As of the Dec. 10 report, the U.S. is still on pace to average 13.2 million bpd in 2020, a 0.9 million bpd increase from 2019 (EIA). It’s important to note that this is a slowdown from 2018 numbers, and the decrease in crude oil production is due to a continuing decline in drilling rigs. A decline in drilling rigs and wells drying up are factors that could impede the United States’ race to become a world’s leading oil producer. To keep pace, technological improvements must continue to support sustainable growth.

There is anticipation that because of rising global oil inventories, crude oil prices will be lower in 2020 than in 2019, but that remains to be seen. In a December article in the New York Times, it was reported that the Organization of Petroleum Exporting Countries (OPEC) and Russia agreed to make cuts in production to compensate for higher oil output. But their cuts have done little to raise crude oil prices in the past due to the steady increase in U.S. shale oil production, especially those barrels from the West Texas area. Only time will tell.

Stay in the know with us. Keep on the lookout for future articles discussing both the local economy here in West Texas, as well as what’s happening in the world. We would love to hear your insight and how you are impacted by our regional and global oil industry. Please share your thoughts in the comments below.

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