The average monthly price for crude oil in Texas was down in April year-over-year for the first time since October 2009.
Economist Karr Ingham tracks drilling and development activity through the Texas Petro Index. He’s concerned the 28-month-long expansion of the state’s upstream oil and gas economy could be coming to an end.
“Part of the problem now is there’s not really a sense as to where the bottom may be. The crude oil drilling environment is so much different now. The cost basis is so much higher in terms of extracting oil from the shale plays in the Eagle Ford and even the activity that’s taking place in the Permian Basin, of course, and other parts of the state, that the cost basis for that activity is much higher than it was even just a few years ago.”
Ingham says a retreat from higher crude prices that prevailed earlier this year was not entirely unexpected and even welcome from a consumer point of view. But he says the oil-price decline caught producers by surprise.
Concerns that European debt woes and economic slowdown in Asia will stunt U.S. economic growth are weighing heavily on crude oil markets. Ingham says that’s fueling uncertainty about underlying support for crude oil pricing.