Oil towns and counties in America’s states most dependent on oil revenues are once again hit by the bust in the oil cycle, but this time the drilling activity slump and the job losses came faster than in previous downturns. And it may take years for communities and state economies to recover from the oil price crash and the lockdowns in COVID-19 pandemic, state and town officials told The Hill.
Oil towns in Alaska, North Dakota, Wyoming, Texas, and Oklahoma are accustomed to the boom-and-bust nature of the oil industry, but this time around, the economic prospects and job losses are aggravated by the layoffs in the hospitality and entertainment industry amid the lockdowns to curb the spread of the coronavirus.
Alaska, for example, could be in for a severe budgetary headache after the oil price and oil demand crash. Alaskan officials admitted in March that the oil price collapse would impact state revenues and constrain spending options. Back in March, analysts warned that the fallout on Alaska’s economy could be worse than just a short-lived bump in the road.
“The massive oil slowdown and the price drop affects literally every sector of the economy because the highest paid job sector is oil and gas and that basically supports a whole spectrum of other jobs,” Alaska state Rep. Chuck Kopp (R) told The Hill.
According to Kopp, Alaska’s budget shortfall has already widened to US$1 billion. Related: U.S. Oil Companies Are Cutting Production Much Faster Than Expected
In North Dakota, the tax commissioner Ryan Rauschenberger also believes that the recovery will take some time and told The Hill he had never seen oil prices plunge this low.
In North Dakota, the active drilling rigs as of May 8 numbered just 20, compared to 64 as of the same time last year, and even lower than the 27 active rigs for the same week during the 2016 price collapse, according to the North Dakota Department of Mineral Resources.
The department’s estimate as of May 4 is that 6,800 wells have been shut-in, leading to a loss of 450,000 bpd of production. North Dakota’s oil production could drop to as low as 500,000 bpd in the worst-case scenario, according to Justin Kringstad, director of the N.D. Pipeline Authority, as per the Western Dakota Energy Association.
By Tsvetana Paraskova for Oilprice.com
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