OPEC Decision Doesn't Intimidate

OPEC to Keep Oil Production High
OPEC to Keep Oil Production High

OPEC announced last Friday that it will stick with its policy to produce oil at a high rate, a measure that may signal they are underestimating Bakken producers.

Related: OPEC Challenges Bakken Shale Drillers

If the measure by OPEC was meant to intimidate U.S. energy producers, they may want to try again. Despite this tactic to crush competitors, U.S. oil companies have worked to streamline operations an become more efficient. Many now claim they can remain profitable at the lower crude prices for some time.

Lynn Helms, head of North Dakota’s Department of Mineral Resources says that “OPEC is still is our main competition. But what you’re seeing now is the Bakken becoming the swing producer, something that has happened relatively quickly because of efficiencies in drilling and completion technology.

In response to OPEC’s announcement, oil prices fell on Monday and analysts project this will prolong the supply glut for the rest of the year. But despite forecasted demands and increasing supplies, OPEC said it expected that the world’s oversupply of crude will likely ease over the coming quarters and that U.S. production will decline in the third quarter.

Read more at opec.com

U.S. Economic Growth Slows

Low prices impact state economies
Low prices impact state economies

Data is beginning to surface on the U.S. economic growth for the first quarter of 2015 and its not looking good.

Marketwatch reports that the gross domestic product expanded by only 0.2% annual pace, well below what was forecasted. Gains over the prior three quarters were 2.2%, 5% and 4.6% respectively.

Related: Low Crude Prices Not Good for All

Much of the blame is being placed on the downturn in the energy industry. The 50% plunge in crude prices in 2014 initiated a domino effect through the economy. U.S. energy producers have been forced to slashed investment and have cut at least 30,000 jobs since January, according to the Commerce Department and it is estimated that the reduction in energy-related spending may have shaved 0.6% percentage points off of U.S. growth.

Many had predicted that the low oil prices would actually spark economic growth as consumers found more disposable from lower gasoline prices.

Scott Hoyt, director of consumer economics at Moody’s Analytics shared an optimistic with Marketwatch, saying that “Energy-related investment and jobs are falling rapidly. However, these cuts will soon begin to fade, and the benefit to consumers from the lower oil prices will grow,

Halliburton Closing Minot Facility

Halliburton Closing Minot Facility
Halliburton Closing Minot Facility

Beginning April 1st, Halliburton will no longer have a presence in Minot, North Dakota. A spokesperson confirmed Tuesday that the company will suspend operations and close the facility, transferring employees to their Williston and Dickinson locations.

This is the latest in a string of announcements from Halliburton about their efforts to streamline operations in the face of the current crude pricing downturn. Earlier this year the company reported worldwide layoffs of 6,500 people followed by an announcement that they would close their facility in Regina, Saskatchewan in March.

Related: Energy Giants Announce Layoffs

Spokesperson Susie McMichae said that “The company continue to make adjustments to its workforce based on current business conditions. We value every employee we have, but unfortunately we are faced with the difficult reality that reductions are necessary to worth through this challenging market environment.

Energy Giants Announce Layoffs

oil prices and layoffs
oil prices and layoffs

Lower crude prices are a double edged sword. The average consumer may enjoy the benefits as cheap fuel reduces the costs of goods and services, but for those whose livelihood relies on the energy industry, the extra cash will be of little solice if they no longer have a job. It has taken some time for the reality of the low oil prices to finally trickle down, but after months of plummeting crude, the boom will become bust for the many who will soon face a pink slip.

Related: Low Oil Prices Offer Uneven Effect

Since November, one company after another announced massive reductions in their 2015 budgets as they have scrambled to cope with the dramatic 50% drop in crude prices since the summer. The next predictable step began last week as companies announced layoffs and prepare to scale back drilling operations.

Amidst the happy refrains from people who are enjoying lower gasoline prices, there is the occasional cynical comment that suggests the only ones who are hurt by low crude prices are the nameless, faceless, deep pockets of the energy companies. This represents a short-sighted and narrow view of the current reality facing workers, families and local economies.

Not only do layoffs affect workers directly, but a report authored by Dr. Robert W. “Bill” Gilmer for U.H.’s Bauer School of Business estimates that with each new energy job created/eliminated, there are three - four other jobs that are also create/eliminated.

Discussing the impact on Houston, Gilmer predicts that “These cuts will be felt from Houston’s machine shops and factories to its office towers. The question becomes how this strange mix of good news and bad balances out to affect Houston’s economic prospects in 2015 and beyond.

Since January 1st, a handful of companies have announced layoffs and it is only a matter of time before others follow. Some analysts predict things could get very ugly as the layoffs extend to local governments, small business and energy-supporting industries. Highlighted below are several giants who recently announced layoffs for early 2015.

Schlumberger: reported layoffs of a staggering 9000 workers more

Halliburton: recently laid off workers in Houston, but declined to give a specific number more

Apache: Also laid off an undisclosed number of workers worldwide more

U.S. Steel: Over 700 expected to be let go starting in march more

Low Oil Prices Offer Uneven Economic Effect

Low prices impact state economies
Low prices impact state economies

As consumers enjoy the benefits of plunging gasoline prices this holiday season, it is still unclear how cheaper crude will impact the overall health of the U.S. economy.

One Washington think tank has estimated that, though many parts of the country will experience a slight economic stimulus in 2015, the lower oil prices will bring a significant downturn in the economic health of energy dependent states.

Unprecedented production in the United States shale plays have contributed to an increase in worldwide oil supplies, resulting in gasoline prices plummeting to their lowest level in almost five years. This has proven to be an economic boom of sorts to American families who are pocketing an additional $25-$75 per month. An additional perk will come as reduced fuel costs will eventually affect the pricing of consumer goods and services.

Stephen Brown with Resources for the Future writes that, “The reduction in oil prices provides US consumers with what amounts to an annual increase in disposable income of $350 billion (about 2.0 percent of US GDP) through reduced prices for gasoline, diesel fuel, other petroleum products, and goods and services whose production uses petroleum products. The average US household will see a raw gain that amounts to $2,790 per year.

The economic picture is not so rosy for everyone. Energy producers and states that are heavily invested in oil production will take a hit in 2015. Some companies have announced they will slash their budgets, with many predicting cuts in their exploration efforts. This will have a ripple effect that will impact local economies and support industries as tax revenues are reduced and layoffs are inevitable.

Download the entire report from rff.com.