Energy Index Suggests Continued Industry Contraction
The Oklahoma Energy Index continues its downward trend, and the correlation between the index and statewide private employment suggests ongoing economic struggles for the industry and the state.
The index of oil and natural gas industry activity fell to 193.8 using data collected in November, a 3 percent decrease from the previous month’s reading and 27 percent below year-ago levels. The November decline marks five consecutive months of contracting industry activity, with industry contraction averaging 2.5 percent per month.
“As the Index declines once again, it appears to be searching for a bottom,” said Chris Mostek, senior vice president of energy lending for Bank SNB. “Early 2016 will require continued perseverance and patience within the industry.”
Private employment in Oklahoma follows the ups and downs of the oil and natural gas industry, said Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute. The relationship stalled in 2015 as private employment managed a lateral move even as the industry contracted sharply (graph provided), giving some false hope that the state is well-positioned to endure the lingering and strengthening economic storm.
“This is unlikely to be the case,” Evans said. “Statewide data is a reflection of the ability of Oklahoma City to keep the worst at bay through much of 2015. Recent data suggest the Oklahoma City economic experience will yield to the pressures of the contraction as the rest of the state already has. The worst of this economic period still lies in the future.”
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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