Energy Index History Offers Insight On Future
Declines in drilling activity and associated industry employment continue to push the Oklahoma Energy Index (OEI) downward, but previous oil and natural gas industry downturns may offer insight on an economic turnaround.
The index of oil and natural gas industry activity fell to 237.99 using data collected in April, a 1.7 percent decrease from the previous month’s reading and 14.7 percent below April 2014 levels.
“Oil prices continue to stabilize, and we are seeing some consensus develop around the expectation for a continued price recovery in 2015 with tempered growth in 2016,” said Chris Mostek, senior vice president of energy lending for Bank SNB. “While this Energy Index reflects a tough drop for the industry, we do see growth in some of the individual indicators, which gives us hope over the long term.”
This month’s Energy Index marks the fifth consecutive month the index has registered below the previous year’s index recording. Since 2000, only in two previous periods has the index sustained such a run of year-over-year contractions.
From October 2001 through October 2002, the index came in below its previous year value for 13 consecutive months. The index trough came in February, when the February 2002 index level came in 15.3 percent below its February 2001 reading. From November 2008 through March 2010, the index contracted for 17 consecutive months with the trough coming in July 2009 when the energy index read 37 percent below its July 2008 level.
“The duration and trough of the current contraction remains to be seen,” said Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute. “Early indications suggest industry contraction will lie somewhere between the contractions experienced previously.”
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.
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