Energy Index Contraction Continues
The Oklahoma Energy Index (OEI) continues to show the economic consequences of falling crude oil prices.
Average crude oil prices have fallen for six months, and the downturn in prices has shown in Oklahoma-based oil and natural gas companies. The Oklahoma Energy Portfolio, a hypothetical portfolio of equity assets from Oklahoma companies that represent activities across the entire oil and natural gas industry, contracted at a 17.3 percent pace, the largest single month drop since the 2008 great recession.
“While the industry is going through an adjustment period due to the lower price environment, we remain bullish on the energy industry in the long-term,” said Chris Mostek, Senior Vice President of Energy Lending for Bank SNB. “The industry has experience making the appropriate adjustments in drilling activity, overhead and CAPEX that the markets historically recover in six to 12 months.”
The energy index is a comprehensive measure of the state’s oil and natural gas production economy established to track industry growth rates and cycles in one of the country’s most active and vibrant energy-producing states. The OEI is a joint project of the Oklahoma Independent Petroleum Association (OIPA), Bank SNB and the Steven C. Agee Economic Research and Policy Institute.
The index of oil and natural gas industry activity fell to 246.71 using data collected in December, a 4.2 percent decrease from the previous month and a 2.8 percent drop from one year ago.
Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute, said although the number of active drilling rigs in Oklahoma fell only slightly in December, a slowdown in the pace of extraction is moving into the state and will be accompanied by workforce contractions. January initial filings for unemployment insurance spiked aggressively over last January’s levels, indicating labor market disruptions which are sure to continue in the short run.
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