West Texas Crude Oil Recovers to Pre-Pandemic Prices
Last April, oil prices plunged to historic lows but this month, the price of West Texas Intermediate surpassed its pre-pandemic price.
After plunging to depths previously unmatched, the price of West Texas crude oil (WTI) has recovered to pre-pandemic levels.
As of Friday afternoon, WTI sits at $56.80 per barrel, $6 higher than this time last year. The price nosedive began on February 17, 2020, and eventually sank to nearly -$40 per barrel in April.
That historic dip came as storage capacity evaporated while consumption demand plummeted due to the pandemic. Since then, the road to recovery has been rocky.
By October, the pivotal Texas industry had made some strides but still staggered from the shock of early 2020.
And despite the price recovery, it may not be as indicative of a full restoration as some may hope. In November, oil production was down 30 percent compared with its January 2020. The state’s operational rig count declined 57 percent across 2020.
Job numbers directly related to production also faced a dip in 2020. Last year ended with about 4,000 fewer oil and gas extraction jobs compared with the beginning of 2020.
Data from the Texas Labor Market Information’s Current Employment Statistics
The global supply dispute with OPEC, the Middle Eastern alliance of petroleum producing countries, remains as well, although no longer at the hostility peak of early last year.
Last year, producers were closely watching the presidential race. A Biden victory would have brought a policy sea change for the energy industry, and uncertainty in any industry hurts projections and future planning.
Biden promised a more hawkish approach to fossil fuel producers, and upon taking office he has followed through on many of those campaign trail promises. On his first day, he revoked the Keystone XL pipeline’s construction permit. The pipeline extension would have provided another inflow of oil to Texas’ refineries in Port Arthur, specifically from Alberta, Canada.
More recently, the president issued a moratorium of new and renewed drilling permits on federal lands — a move which the American Petroleum Institute projected would cost Texas 120,000 jobs.
Environmental groups cheered those decisions as small steps in the right direction.
Industry insiders, however, see Washington’s actions as a heavier constraint on domestic production that will cause consumer prices to increase.
A new report from the Texas Independent Producers & Royalty Owners Association (TIPRO) found that the oil and gas industry accounted for 4 percent of the U.S. economy, creating $741 billion in Gross Regional Product.
The industry accounted for 15 percent of the total state economy.
Ed Longanecker, president of TIPRO, said in a statement about their findings, “The Texas oil and natural gas industry continued to show its resiliency and economic impact during one of the most challenging periods in its history.”
Texas Railroad Commissioner Wayne Christian told The Texan in a statement, “According to the Texas Alliance of Energy Producers, monthly posted WTI crude oil prices fell by more than 30 percent in 2020 compared to 2019 causing companies to go bankrupt and Texas to lose nearly 60,000 direct upstream jobs.”
“As crude prices stabilize back into the mid-$50 range investment should follow, however regulatory uncertainty from the Biden Administration and increased interest in ESG investment strategies could slow or halt the growth of the oil and gas industry,” he concluded.
While still a far cry from the booming industry that closed out the last decade, the price recovery is one step in the right direction for the state so reliant on cheap, reliable energy.