With the price of crude oil down 70 percent since mid-2014, there’s trouble across the U.S. oil patch:
• 145,000 mining jobs lost in the U.S. since a post-recession peak in 2014, according to the U.S. Bureau of Labor Statistics.
• Nearly 60,000 oil and gas jobs lost in Texas in the past year, according to the Texas Alliance of Energy Producers.
• More than 40 bankruptcies of U.S. energy companies in the past year.
• 30,000 U.S. coal-mining jobs have been lost (30 percent of the total) since 2012, as global coal prices have fallen in tandem with oil prices.
Over the past decade, oil and natural-gas production boomed from Texas to North Dakota to Pennsylvania, as new shale fields were discovered and new hydraulic “fracking” techniques made it cost-effective to explore for, and pump, new domestic fossil-fuel supplies.
But the recent global price-rout has washed the bottom out of the U.S. energy sector. Global oil producers, led by OPEC, have massively over-produced in the past two years, even as the global economy sputtered and energy demand flagged.
The result: U.S. oil production in many of the newly-developed fields has become uncompetitive and barely profitable.
Today, Saudi Oil Minister Ali Al-Naimi faces oil executives and wildcatters on the receiving end of this drastic market shift. Al-Naimi delivers the keynote address at the annual IHS CERAWeek energy conference in Houston. Al-Naimi is the front-man for Saudi Arabia’s decision in late 2014 to pump-to-the-max. Other OPEC countries (Organization of Petroleum Exporting Countries) followed suit to defend their market share; oil flooded the market; crude prices plummeted.
And oil-exporting countries have kept over-producing to squeeze out as much revenue as possible, even as the return-per-barrel (after accounting for the cost of production) has shrunk. Some countries are now in deep financial trouble as the contribution of oil revenues to public budgets dwindles. Global supplies, meanwhile, are expected to rise even more as Iran re-enters the market following its nuclear deal with world powers.
Saudi Arabia recently signaled it doesn’t want OPEC production to rise anymore. An agreement to freeze production at January’s (near-record) level was announced last week by Saudi Arabia, Russia, Qatar and Venezuela. But Iraq — another major producer — wasn’t part of the deal. And Iran is trying to ramp-up production, as it re-enters the world market after its nuclear deal with world powers.
Saudi Arabia, meanwhile, recently saw its credit rating downgraded by Standard & Poor’s. That reflects the kingdom’s deteriorating financial position as it pumps more, but earns less, in a glutted global market.
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