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The Texas Petro Index, a broad gauge of economic activity in upstream oil and gas production registered its second monthly decline in a row. The index fell to 309.5 in December, after hitting a record high of close 312.9 in October.
Petroleum economist Karr Ingham, who created the index on behalf of the Texas Alliance of Energy Producers, says the drop in crude oil prices is knocking down the other components of the index like falling dominoes.
“Drilling permits peak in October,” Ingham says. “That’s the next domino to fall, and then fall by 50 percent from that level in November and December. The next domino is the rig count, which held its own through the month of November, but then began to enter into a steady and sharp decline in terms of the weekly rig counts ever since then.” He expects the state’s total rig count to drop off by as much as two-thirds, from its November high of 906 to about 300, a trough last seen during the 2008 recession.
“Industry employment likely peaks in the first quarter of this year, and no later than in the second quarter, I think we’ll see industry employment peak and begin to contract,” Ingham says. He predicts at least 50,000 upstream oil and gas jobs are likely to be lost this year, wiping out all of last year’s gains. The final domino in the chain would be Texas oil production itself. Ingham says production will likely peak and begin falling later this year.
