TULSA, Okla. — An unprecedented day for oil.
“I mean this is comparable to a huge stock market crash in terms of its impact on one industry," said Tom Seng, director of the University of Tulsa School of Energy.
Low demand for May futures contracts caused the price to fall to negative $37.63 per barrel on Monday. Seng said concerns over low prices have been building for months as coronavirus and stay-at-home orders lower demand. While the low price is good for gas prices, it's not good for oil companies.
“We’re going to lose jobs and companies are going to go out of business at $20 to $22 oil," Seng said. "That’s a fact.”
Oil companies aren’t the only ones that will be affected. This will be a hit to service companies that provide things like equipment and fabrication. As well as the small Oklahoma towns where drilling occurs.
“Those workers are filling up the cafes and the hotels and the bars and restaurants and those kinds of things," Seng said. "And so, they’ll leave the towns as well.”
It will also impact revenue to the state. Oklahoma collects a five percent gross production tax on every barrel of oil that’s produced in the state.
Economists with Oklahoma State University predict the loss of 10,000 energy jobs. June futures contracts are already selling in the $20 range, but that price is not high enough. Seng said as summer nears and demand stays low, oil companies are going to have to make some changes.
“It’s horrendous, but we can’t do anything about it," he said. "So, okay, let’s look at June. June’s in the 20s, let’s start trying to find some areas. The U.S. oil and gas companies are going to have to cut production.”
Seng said we have rebounded from dips before and we'll rebound again, but he's not sure when.
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