With the release of Iranian oil into the markets, there is a new global panic about oil prices.
The former Persia was a longtime source of oil production, but the militant Islamists in charge of the country made it a pariah through support of terrorism and through its potential to develop nuclear weapons. While we hope for the best with a new international agreement on arms control, more oil on the market is probably not what Louisiana’s energy producers need right now.
More oil on the world markets raises fears that the price per barrel will tumble to $20, a low that hasn’t been seen in decades.
The impact on both state and local revenue has been substantial here in Louisiana.
In November, retail sales in Lafayette Parish — a national center for oil production and oilfield services — fell more than 7 percent compared with the same month in 2014. It’s the eighth consecutive month that sales were down.
Those are the kind of numbers that cannot help but worry newly elected Mayor-President Joel Robideaux and the council, but at the state level, there are similar worries for Gov. John Bel Edwards and the Legislature. The budget forecast is based on a now-unreasonable $48 barrel price.
That’s trouble, although not as bad as the mid-1980s when oil prices collapsed and more than 40 percent of the state budget was dependent on oil revenue. It’s still a serious impact.
“While we have a record low rig count, historic low permitting, and have lost around 9,000 jobs in Louisiana, we are just one of many states that have felt the impact of this decline,” notes Don Briggs, head of the Louisiana Oil and Gas Association. “We are not in this fight alone.”
Briggs has seen it all in a long career in the industry as participant and lobbyist for oil and gas firms.
There’s nowhere to go but up from here, he advised industry-watchers recently.
“While the oil and gas industry has taken a hit on the nose, our people are some the most resilient people in the workforce. These men and women are used to rain, sleet, snow and lightning. The job must go on for them,” he wrote.
The long term obviously demands energy for a growing national and global economic future. “We have been drilling wells in this state since the early 1900s,” Briggs said. “We will not be stopping anytime soon.”
This not just whistling past the graveyard, even as the market processes the impacts of new sources of oil — via fracking wells in the United States — or old sources, such as the reopening of oil reserves in Iran. Our energy industry is going through tough times, and that has a substantial economic and social impact in Louisiana, but we’re confident for the longer term that energy demand will rise again, as will Louisiana’s oil patch.