While the current excess of oil supply has led to challenges across the energy sector, the worst of the crisis is very likely behind us.
That’s according to LSU Center for Energy Studies director David Dismukes, who addressed the impact of the novel coronavirus and the Saudi/Russia oil price war on the state’s oil and gas industry with Louisiana Mid-Continent Oil and Gas Association President Tyler Gray during a Baton Rouge Area Chamber webinar this morning.
“The not-so-good news is that there is still uncertainty regarding how this recovery will happen,” Dismukes says. “Getting into a recovery mode will be the best medicine, not just in oil and gas, but for everything else. … [In the future], the industry is going to look a lot different.”
While crude oil prices climbed into the mid $50s per barrel last October, prices were softening at the start of the year, even before the spread of COVID-19 and Russia and Saudi Arabia got into an oil price war. In April, the price of West Texas Intermediate—the benchmark for U.S. oil—was negative for the first time in history, falling as low as minus $37.63 a barrel.
Since then, however, Dismukes says there’s been a big rebound.
“I think we’re out of the woods for prices dropping into the negative $30s,” he says.
As far as production goes, he says the tide is turning on that front as well and cited the recent OPEC-Russian agreement.
Since the emergence of the coronavirus, Gray says his organization has been communicating with plant managers to develop ways to keep operating safely with their workforces.
LMOGA has also made proposals to the Legislature and Gov. John Bel Edwards for immediate, short-term and long-term requests relating to industry, like royalty payment relief and lease term exemptions.
For the ongoing special session, Gray plans to pursue a couple of these proposals he says will help localities incentivize investments in the industry.
