Rural Areas Hit Hardest by Energy Industry Downturn
The contraction of the Oklahoma Energy Index continues, and it is Oklahoma’s rural communities that have faced the greatest economic hardship.
The Oklahoma Energy Index contracted for the 13th consecutive month in January, leaving activity in the state’s most defining industry 31 percent lower than the year before. The index of oil and natural gas industry activity fell to 166.9 using data collected in January, a 2.9 percent decrease from the previous month’s reading.
“Unfortunately, the ripple effect of the energy downturn continues to be felt throughout the state’s economy,” said Chris Mostek, senior vice president of energy lending for Bank SNB. “Many in the business community are understandably cautious."
Revised employment data from the Oklahoma Bureau of Labor Statistics shows the contraction in oil and natural gas industry employment was steeper than reported in previous Energy Indexes, with the greatest impact in communities in the fields of extraction.
Beckham County, the launchpad for the Granite Wash in western Oklahoma and the Texas panhandle, saw its unemployment rate rise from 2.4 percent to 5.6 percent from December 2014 to December 2016. Stephens County, the birthplace of Halliburton Energy Services and a part of the prolific SCOOP play, saw unemployment rates rise from 3.7 percent to 6.5 percent in the same time frame. In Oklahoma’s urban cores, Oklahoma County’s unemployment rate actually fell from 3.5 to 3.4 percent, and Tulsa County unemployment rose slightly from 3.6 to 3.7 percent, according to the Oklahoma Employment Security Commission.
Dr. Russell Evans, executive director of the Steven C. Agee Economic Research and Policy Institute, said oil and gas industry recovery hinges greatly on events outside of the control of Oklahoma oil and natural gas producers. If fears of a U.S. recession, Chinese financial crisis or breakdown in OPEC production freezes come to pass, the industry’s economic condition would deteriorate further. If those fears are unfounded, Evans said, the industry would turn a corner toward recovery in the second half of 2016.
“Oklahomans are advised to brace for the reality that the worst economic headlines are yet ahead, while watching closely developments in the national and global economy,” Evans said. “A near-term recovery depends on a series of events unfolding through 2016, starting with the U.S. pushing through recessionary headwinds and stabilization of the Chinese economy.”
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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